A guide to better negotiations.

Even though you might not realise it, you negotiate something every day whether it is persuading your toddler to eat her spinach or convincing your spouse that buying the 60-inch flat screen TV currently on sale would make your marriage so much better.

While most people perform this kind of everyday negotiations without reflecting on why or how; many people dread formal negotiations, like hammering out a contract with a supplier or arguing for a pay raise. Arguably, this comes from the fact that most people are not natural-born negotiators, often leaving money on the table without even realising it. The good news is that by building an understanding of the basic psychological traits influencing how people make decisions, most people can become strong negotiators.

This short guide presents a basic framework for efficient negotiations and is based on research by the Harvard Negotiation Project (HNP) [2018] from which much of today’s leading negotiation literature has heavily borrowed. Employing this framework in your next negotiation will help you prepare an efficient strategy, bargaining more efficiently, and to build profitable long-term business relationships.

1. The art of negotiation

Merriam-Webster defines a negotiation as “a process in which two or more parties resolve a dispute or come to an agreement” [2018]. Before getting our hands dirty discussing how to develop more effective negotiation strategies, it might be worth debunking what Leigh Thompson calls “the most prevalent myths about negotiation behaviours” [2013, p .6-8]:

Good negotiators are born.

Wrong. Very few people are naturally gifted negotiators. Effective negotiation requires practice and feedback.

Good negotiators take risks.

Wrong. While people tend to be impressed by tough negotiators (this is my final offer; take it or leave it), tough negotiators are rarely efficient.

Good negotiators rely on intuition

Wrong. Professional negotiators do not rely on intuition and gut feeling—but on deliberate thought and planning.

Fig 1: The most prevalent myths about negotiation behaviours (Thompson,2013, p .6-8])

2. Psychology at the negotiation table.

Much thank to decision theory which is the science of trying to understand how decisions are made, it is now well-established that we as humans (even though most of us might think the opposite) are irrational when making decisions [Malhotra and Bazerman, 2008]. This comes from the fact that people to a great extent rely on a variety of “heuristics” or mental shortcuts in their decision process to reduce the mental effort that comes with having to make decisions.

While you might not be familiar with all the over one hundred known heuristics or cognitive biases influencing your decision process, you probably like most people: judge new acquaintances just by the first look—and not by taking time getting to learn the person (“stereotyping”); have a tendency to blame others when things go wrong—while having no problem taking credit when things go as planned (“self-serving bias”); and probably also see past events as predictable (“hindsight-bias”.

Learning about the most common cognitive biases and how they affect decisions is a well worth investment which not only will help you close more beneficial agreements at work or when buying your next house—but understanding how to exploit heuristic reasoning for your personal gains might also be a lifesaver next time your three-year-old lay flat down on the supermarket floor screaming to give you the cookies back.

Fig 2:, All widely acknowledged cognitive biases:

3. Preparation

While Amazon lists over 30.000 results for negotiation books of varying quality, most authors of negotiation literature at least seem to agree on preparation as the key to success.

To get what you want in a negotiation you always should take the time to think through your bargaining position and alternatives—besides also trying to figure out what the other side’s likely issues and alternatives are.

In her widely acclaimed book ‘The Mind and Heart of the Negotiator’ [2013], Northwestern University professor Leigh Thompson recommends that the first step when preparing a negotiation is to set a realistic but ambitious target—the so-called aspiration point. Thompson points out that while it is important not being an under-aspiring negotiator who sets the target too low resulting in disappointment and regret for not aiming higher when the counterpart immediately accepts your first offer (the so-called “winners course“), it is also important not to be over-aspiring, aiming too high.

The next step when preparing negotiations which is discussed in-depth by Roger Fisher in Getting to Yes [2011], is to determine your “best alternative to a negotiated agreement” (BATNA). Having one or a few fall-back alternatives in the back pocket if a negotiation fails (like a few more house options when you negotiate your next house deal) will help you keep your head clear and to know when it is time to walk away from the negotiation table.

Fig 3, below presents Harvard Business School professors Deepak Malhotra and Max H. Bazerman recommended process to developing a strong BATNA as presented in their book ‘Negotiation Genius’ [2008]:

3.1 Figure out what your counterpart wants

Efficient negotiators, however, do not only work to understand their own needs and wants but also take time to analyse the other parties’ BATNA and reservation point to define the zone of possible agreement (the ZOPA). Understanding the ZOPA is vital for any negotiation by the simple reason that if a buyer’s reservation point is lower than the sellers, there is no ZOPA and no deal will be made (see Fig 4, below):

4. Negotiation strategies

In ‘The Science of Settlement’ [2013] Goldman stresses that one of the most important areas to consider when defining a negotiation strategy is to understand both your own AND the other parties’ negotiation style.

According to Goldman negotiators can be divided into competitive’s which are inclined to hardball tactics and intimidation, and cooperatives inclined to joint problem-solving.

Neither the pure competitive or cooperative style is likely to gain an optimal deal and Goldman identifies three common outcomes when these negotiation styles meet, which is illustrated in Fig 5 below:

Goldman also emphasizes that negotiators should be aware of different negotiation styles, how individual negotiation styles interact—and most importantly—that negotiators should identify their own style to achieve optimal deals. While there is a plethora of methods, tests and systems to identify personal negotiation styles; figure x, below illustrate four acknowledged and well-known tests to determine your style of negotiation – each with its ins and outs.

4.1 Adapting for culture

Members of contrasting cultures not only focus on different aspects of an agreement but also have widely different styles and preferences for solving disputes and contractual issues. Considering a negotiation between an American and a Japanese.

The American, according to Perlmutter and Heenan [1974], will see the negotiation as a way to solve contractual issues, while the Japanese will see it as an opportunity to establish a relationship. Japanese often negotiate as a large team, while for Americans it is not unusual that a single person negotiates even for large organisations. Japanese negotiators might respond to a proposed negotiation term with silence and a long pause—which American negotiators often wrongly interpret as a non-agreement from the Japanese side.

These differences in styles of negotiation often leaves Americans feeling puzzled, lost and irritated in Japanese negotiations (Kumayama, 1991), while Japanese negotiators on the other hand often express finding Americans in negotiations as rude, non-cooperative and unstructured (Adachi, 2010). Fig 6, below illustrates some typical differences between American and Japanese negotiators.

When entering a cross-cultural negotiation, it is important to acknowledge the cultural norms of the other party and to adapt one’s strategy to these to avoid confusion, misinterpretations, to build better relationships—and ultimately negotiate better terms.

A number of cultural frameworks exist which identify cultural value systems, explaining traditions, and recognise cultural differences. Negotiators can use these frameworks to better understand the other party in cross-cultural negotiations and to build optimal negotiation strategies.

Fig 7, below presents links to critiques of cultural frameworks which are well worth reading for anyone planning to use cultural frameworks as part of their negotiation strategy:

It is important not to confuse cultural frameworks with physiological/personality frameworks such as The FiveFactor Model and Meyer Briggs. Personality frameworks can be an efficient instrument in, for example, an employment process where the applicant gets to perform a survey based on scientifically validated questions mapping responses to the framework used for the survey. In general negotiations where you have little or no knowledge of the individual personalities of the other party however, personality frameworks by obvious reasons are of little use.

4.2 Expanding the pie

Imagine that you just got a bonus and decides to use it to buy a brand-new Porsche. While you personally can’t see how a Porsche can be a bad choice as a family car, your spouse thinks the whole idea of buying a sports car ridiculous, pointing out that this is nothing but a sign of a middle-age crisis. Your spouse also notes that not only will the car be super expensive to buy, but you also will need to pay for a heated and safe garage at least seven months per year as you live in Sweden where there are tons of snow in the winter.

After a few weeks of haggling, you finally come to an agreement with your better half. You can buy the car but not for a dime over 150.000 (besides you also having do the dishes for the next ten years).

Visiting the dealer, you soon feel devastated after a long and hard negotiation with the dealer finally explaining that 156.000 is the absolute lowest she can go without getting fired (her reservation point). With tears down your cheeks, you put all cards on the table explaining that even if you wanted, your spouse simply would kill you if you paid even a cent more than 150.000. Moreover; on top of the cost for buying the car, you also have the expense of winter storage which will cost you an additional 6.000 per year. The dealer then lights up. What if you for the next three winters got to park the car for free in their garage? This would save you 18.000 in winter parking costs, meaning that even if you pay 156.000 for the car, it would actually not cost you more than 138.000 if subtracting the cost for the winter parking. Having just saved 12.000 you shout “deal” before the dealer regrets her mind. In euphoria, you turn the keys of your new Porsche and drive home.

The dealer, though, is super happy. Sure, she only got 156.000 in the end, which was the absolute lowest she could go, but she got the deal, and also, letting you park the car in their garage would cost her noting as they have plenty of space. And even better. As she knows you will come back every autumn and spring for the next few years, this will give her plenty of opportunities to build a profitable, long-term relationship with you which will allow her to sell you extra bling-bling to your new car. And who knows, maybe she even can convince you to buy the new model next winter.

This is an example of integrative bargaining; a strategy of negotiation in which parties focusing on negotiating a win-win deal without having to make concessions—which in negotiation literature often is referred to as Expending The Pie. Integrative bargaining has won a lot of attention since the publication of ‘Getting to Yes” in 2011 and is a strategy recommended in most literature of negotiation methods, including Wheeler [2013]; Johnston [2012] and Thompson [2013]. Integrative bargaining not only can help to negotiate optimal deals for both parties in a negotiation, but also can help to convert opportunities into profitable, long-term client relationships.

4.3 Building a personal relationship

In ‘The Science of Settlement,’ Barry Goldman discusses the importance of rapport building in negotiations, which is just a fancier term for building a harmonious relationship or “liking” with your negotiation counterpart. If both parties of a negotiation like each other, the negotiation is more likely to open up for integrative bargaining, optimal terms for both parties, and long-term relationships with future opportunities.

While you can come a long way in building a “liking” by simply taking time to initiate a negotiation by small talk for a few minutes, personal relationships rely on known psychological effects. One such effect is the fact that we tend to like people that are like ourselves—the so-called similarity attraction effect [Montoya and Horton, 2012]. Learning about physiological effects and how they influence rapport building can help to build trust, liking and more efficient negotiation strategies.

Below is presented three physiological effects that can be used to build a personal”liking” in a negotiation:

#Physiological effects influencing negotiations

#Mirror and Match

Research show that we like people who are like us and by adapting your body language, tone-of-voice and communication style to that of your negotiation counterpart can help you develop rapport in a negotiation.

#Active listening

When someone perceives that you are actively listening to them, they feel important, understood, appreciated, and respected. Being a good listener is simply a great way to build liking in a negotiation process.

#Finding common interests

We tend to like people sharing the same interests as ourselves and a powerful rapport building technique is to identify common experiences and interests with the other party of a negotiation and bring those up in some small talk.

Fig 9: Physiological effects influencing negotiations (Goldman, 2012)

4.4 Repair broken trust

In ‘The Mind and Heart of the Negotiator’, L. Thompson points out that many negotiations fall apart due to broken trust. While reasons for negotiation breakdowns can be anything from poor communication, refusal to bargain, or lack of planning [Ashe-Edmunds, 2018]; Thompson note that in case of a breakdown it is important to immediately take steps toward repairing the trust and propose a twelve-step process presented in Fig 10,below. While you might not agree with each step of Thompson’s process, all professional negotiators should have a strategy for getting broken negotiations back on the table as a matter of contingency planning.

5. Conclusion

Most people are not natural born negotiators but by following well-established bargaining methods and by building an understanding of a few basic psychological traits influencing how people make decisions, negotiators can raise their odds in achieving optimal terms at the negotiation table. This post presented a basic framework for efficient negotiations based on leading research by the Harvard Negotiation Project (HNP) [2018]. Employing this framework in your next negotiation will help you prepare an efficient strategy, bargaining more efficiently, and will help you to build profitable, long-term business relationships.

 

References

Adachi, Y. (2010). Business Negotiations between the Americans and the Japanese. Global Business Languages:, [online] 2(4). Available at: http://docs.lib.purdue.edu/gbl/vol2/iss1/4 [Accessed 15 Apr. 2018].

Ashe-Edmunds, S. (2018). What Breaks Down Negotiation?. [online] Yourbusiness.azcentral.com. Available at: https://yourbusiness.azcentral.com/breaks-down-negotiation-15911.html [Accessed 16 Apr. 2018].

Every Single Cognitive Bias in One Infographic,. (2018). [image] Available at: http://www.visualcapitalist.com/every-single-cognitive-bias/ [Accessed 14 Apr. 2018].

Fisher, R., Ury, W. and Patton, B. (2011). Getting to yes. New York: Penguin.

Globeproject.com. (2018). GLOBE. [online] Available at: http://globeproject.com/ [Accessed 17 Apr. 2018].

Goldman, B. (2013). Science of Settlement: Ideas for Negotiators. 1st ed.

Hofstede Insights. (2018). National Culture – Hofstede Insights. [online] Available at: https://www.hofstede-insights.com/models/national-culture/ [Accessed 17 Apr. 2018].

Johnston, K. (2012). The Art of Haggling. [online] Harvard Business School. Available at: https://hbswk.hbs.edu/item/the-art-of-haggling [Accessed 16 Apr. 2018].

Korobkin, R. and Guthrie, C. (2004). Heuristics and Biases at the Bargaining Table. SSRN Electronic Journal, Marquette Law Review(87), pp.795-808.

Kumayama, A. (1991). Japanese/American cross-cultural business negotiations. Intercultural Communication Studies, [online] 1(1). Available at: https://web.uri.edu/iaics/files/04-Akihisa-Kumayama.pdf [Accessed 15 Apr. 2018].

Malhotra, D. and Bazerman, M. (2008). Negotiation genius. New York, N. Y.: Bantam Dell Pub. Group.

Malhotra, D. and Bazerman, M. (2008). Psychological Influence in Negotiation: An Introduction Long Overdue. SSRN Electronic Journal. [online] Available at: http://www.hbs.edu/faculty/Publication%20Files/08-058_17eca3fb-6891-4572-a8f0-7f25a4b92729.pdf.

Mindtools. (2018). Trompenaars model of national culture. [online] Available at: https://www.mindtools.com/pages/article/seven-dimensions.htm [Accessed 17 Apr. 2018].

Merriam-webster.com. (2018). Definition of NEGOTIATION. [online] Available at: https://www.merriam-webster.com/dictionary/negotiation?utm_campaign=sd&utm_medium=serp&utm_source=jsonld [Accessed 12 Apr. 2018].

Montoya, M. and Horton, R. (2012). A meta-analytic investigation of the processes underlying the similarity-attraction effect. Journal of Social and Personal Relationships, 30(1), pp.64-94.

Patton, B. (2005). Seven Elements of Negotiation. In: M. Hoffit and R. Bordone, ed., The Handbook of Dispute Resolution, 1st ed. Harvard’s program on negotiation, pp.279-300.

Perlmutter, H. and Heenan, D. (1974). How multinational should your top managers be?. Harvard Business Review, 52(6), pp.121 – 132.

PON – Program on Negotiation at Harvard Law School. (2018). Harvard Negotiation Project. [online] Available at: https://www.pon.harvard.edu/category/research_projects/harvard-negotiation-project/ [Accessed 12 Apr. 2018].

Saee, J. (2008). Best practice in global negotiation strategies for leaders and managers in the 21stcentury. Journal of Business Economics and Management, 9(4), pp.309-318.

Shonk, K. (2018). What is Negotiation? – PON – Program on Negotiation at Harvard Law School. [online] PON – Program on Negotiation at Harvard Law School. Available at: https://www.pon.harvard.edu/daily/negotiation-skills-daily/what-is-negotiation/ [Accessed 12 Apr. 2018].

Thompson, L. (2013). Mind and Heart of the Negotiator, The. 1st ed. Pearson Education UK.

Wheeler, M. (2013). The art of negotiation. New York: Simon & Schuster.