How Your Imagination Can Make You a Better Negotiator

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When negotiating, we would love to have a strong BATNA (best alternative to a negotiated agreement).  In those instances, the attractive fall-back plan enhances our leverage at the negotiating table.  Moreover, it boosts our confidence as we negotiate with a counterparty. 

What happens, though, if we don't have a solid alternative? Are we doomed to be a very weak position at the negotiating table? Michael Schaerer, Martin Schweinsberg, and Roderick Swaab have explored these questions in a new paper titled, "Imaginary alternatives: The impact of mental simulation on powerless negotiators."   They find that imagining an attractive alternative can have beneficial effects, even when no such option exists.  The scholars summarize their findings:

The present research demonstrates that negotiators can act powerfully without having power. Researchers and practitioners advise people to obtain strong alternatives prior to negotiating to enhance their power. However, alternatives are not always readily available, often forcing negotiators to negotiate without much, or any, power. Building on research suggesting that subjective feelings of power and objective outcomes are disconnected and that mental simulation can increase individuals’ aspirations, we hypothesized that the mental imagery of a strong alternative could provide similar psychological benefits to having an actual alternative. Our studies demonstrate that imagining strong alternatives causes individuals to negotiate more ambitiously and provides them with a distributive advantage: negotiators reached more profitable agreements when they either had a strong tendency to think about better alternatives (Study 1) or when they were instructed to mentally simulate an attractive alternative (Studies 3-4). 

The findings demonstate the incredible power of our imagination, and they warrant further investigation outside of the laboratory.  

Are You Signaling a Desire to Cooperate?

Emma Levine, Alixandra Barasch, David Rand, Jonathan Berman, and Deborah Small have published an interesting new paper titled, "Signaling emotion and reason in cooperation," in the Journal of Experimental Psychology.  They conducted a series of experiments to examine how people decide whether to cooperate with another individual.   The experiments used two-player prisoner dilemma games to examine what might cause someone to be more or less cooperative with another party.   Their findings identify an interesting distinction between emotional and rational cues.  Here's an excerpt from NYU Stern's concise summary of the article: 

The experiments revealed that people infer that emotional actors are more likely to be prosocial, or altruistic, than rational actors. That is, people assume that individuals who make their decisions emotionally are more likely to cooperate, and then respond accordingly by cooperating more with them. “We find that people associate one’s reliance on emotion with prosocial motivations and feelings such as empathy and compassion, rather than selfish emotions, such as greed,” says Professor Barasch.

In addition, reaction to these signals depends on how people themselves make decisions. While people who rely on emotion themselves are quite responsive to signals of emotion and reason, people who rely on reason do not respond as strongly to these cues, instead making their decision to cooperate through calculated self-interest. “We show that people see emotion as a signal of cooperation, and will cooperate more with individuals who make their decisions emotionally. However, signals like this are less important to people who make their own decisions using reason – they cooperate less overall, and are not responsive to these social cues.”

The study has important implications as we work on new teams or with new partners on a project or initiative.   We not only need to be aware of the cues that we are emitting, but we must understand how others make decisions.  Are they more rational or emotional? What does that mean for our ability to engage in cooperative behavior?   Naturally, we also need to be careful not to put ourselves in a precarious position, where others might try to take advantage of our altruism.   Finally, we need to think carefully about our own behaviors that might suggest a powerful desire to pursue self-interests.  Those cues might harm our ability to elicit cooperation from the very people we need to work with to achieve our personal goals as well as the broader organizational objectives.  

Why We Might Want to Meet Face-to-Face

Laura Vanderkam has written a good article for Fast Company about the value of face-to-face communication.  She examines the science behind why in-person communication may be more beneficial than virtual meetings at times. 
 

Vanderkam points to one particularly interesting study by Juliana Schroeder, Jane Risen, Francesca Gino, and Michael Norton. They found that, "Handshakes are particularly consequential nonverbal gestures in negotiations because people feel comfortable initiating negotiations with them and believe they signal cooperation." The scholars discovered that handshakes lead to more cooperation in a negotiation. That collaboration helps people grow the pie, i.e. achieve potential win-win outcomes. Moreover, the handshake led to more honest behavior. People were less likely to lie about their interests after exchanging a handshake with another party. 

Vanderkam points out several other benefits of face-to-face communication.  You can read nonverbal cues more easily, and frankly, you are more attentive as it becomes much more socially awkward/inappropriate to multitask in person.  In other words, you are simply less likely to look at your laptop, tablet, or phone if you are in a face-to-face meeting than in a virtual setting. 

Negotiation Tips

Inc. magazine has a great new article about how to negotiate effectively.  The article features six tips from Professor Linda E. Ginzel of the University of Chicago Booth School of Business.  Several tips will be quite familiar to many people (focus on interests, not positions, enlarge the pie before dividing).  Her final two tips warrant mentioning because they are the hardest to employ, but they are critical to negotiation success.

Adapt your strategy to your counterpart's style.

"Be aware that different problem-solving modes are available to you: competition, collaboration, accommodation, cooperation, compromise and avoidance. Remember to switch strategies when lacking progress."

Practice conditional cooperation.

"Be nice (don't be the first to defect). Be provokable (reciprocate defection). Be forgiving (reciprocate cooperation). Don't be envious (don't compare your success relative to other players). Be clear (don't be too clever)."

Never Make the First Offer: Is That Bad Advice?

The conventional wisdom is clear:  In a negotiation, you should never make the first offer.  We've all heard this advice, and we probably have tried to adhere to it when buying a car, working out a business deal, or negotiating a salary.  Is this good advice though? Is the conventional wisdom actually correct?

Northwestern negotiation expert Leigh Thompson thinks we should question the conventional wisdom.  She points out that research has never validated this advice.  In fact, some new research suggests that making the first offer leads to better outcomes.  Several good reasons exist for choosing to make the first offer.  For instance, she points out that people are subject to anchoring bias.   In other words, we often rely too heavily on an initial point of data.  We begin with that number, and we adjust from that point... and we would behave differently if not anchored originally by an initial piece of data.   Thus, you can anchor the other party by making the first offer, and you can use that anchor to your advantage. 

Thompson also offers some good advice so as to make an effective first offer.   First, she reminds us that few parties will take the first offer.  Keep that in mind when you put your offer on the table.  Second, be realistic with your first offer.  An outrageous first offer can create a "chilling effect" that will make it hard to come to an agreement with the other party.  Finally, a good first offer is often close to other party's BATNA (best alternative to a negotiated agreement).  Again, if the offer is far worse than the other party's BATNA, it may be viewed as outrageous and make a deal highly unlikely. 

Anxious Negotiators Lose Big Time!

Wharton Professor Maurice Schweitzer and graduate student Alison Wood Brooks have published an interesting paper titled, "Can Nervous Nelly Negotiate? How Anxiety Causes Negotiators to Make Low First Offers, Exit Early, and Earn Less Profit."  The scholars examine the effects of anxiety on business negotiations.   Not surprisingly, they find that anxiety can be very harmful in a negotiation. The study goes one step further though.  It shows precisely how anxiety harms negotiators.   Specifically, the researchers found that more anxious negotiators made lower initial offers, and they responded to others' offers more quickly.   Those behaviors contributed to the fact that anxious negotiators ultimately achieved worse outcomes. 

Why do anxious negotiators behave in this manner?  Schweitzer and Brooks explain that anxiety seems to induce conflict avoidance.  Anxiety often brings with it a desire to minimize the likelihood of confrontation with the other party.   However, the desire to avoid confrontation often drives a negotiator to compromise prematurely or advocate for their own interests less forcefully.   The lesson is clear:  If you are feeling anxious, step back for a moment and collect yourself before beginning a negotiation.  Your anxiety may not just make you feel sick to your stomach; it may lighten your wallet too! 

Differences Key to Negotiations: Ask Bill Belichick!

The 2011 NFL Draft has just ended, and all of us can learn a valuable lesson from Coach Bill Belichick of the New England Patriots (even if you are a slightly misguided fan of the dreaded New York Jets).  Belichick has become known for "trading down" in the draft.  Put simply, he often gives up a high draft pick for a high draft pick the following year, providing the other team also gives him an additional lower draft pick as part of the trade.  Take this year's trade with the New Orleans Saints for instance.  He gave up the Patriots' pick at the bottom of the first round for the Saints' pick in next year's first round (expected to be about in the same exact spot).  However, the Saints also had to give the Patriots a second-round pick this year.   These moves frustrate Patriots' fans, as they tend to not like when Belichick gives up the chance to take a flashy, well-known first round player in the current year.  However, he explains that these moves provide the Patriots "good value" - after all, the Patriots got that additional pick from the Saints.

Interestingly, academic researchers Cade Massey and Richard Thaler have examined the NFL draft and shown that, in the past, general managers tended to overvalue first-round picks.  In other words, teams gave up too much to move up and get another first round pick in the draft.  The brainy Belichick has examined this research, and he takes advantage of the fact that teams are often willing to pay too much to move up in the draft.  So, he gladly makes the trade and moves down.

However, there's more to this story.  By now, most general managers have become aware of this tendency to overpay for first round picks.  Yet, people still make trades like this one between the Saints and Patriots. Why?  The answer lies in the fact that Belichick may have a lower "discount rate" than other general managers. In other words, he may not discount the value of picks in future years as much as others do.  He has a more long term view. Other general managers may have a much more short term orientation, valuing the pick today MUCH more than the pick next year or thereafter.  Naturally, with three Super Bowl championships and a supportive owner, Belichick can afford to adopt a long term view. Some may argue that the Saints gave up too much here, but to them, this made good sense.  The same holds true for the Pats, because they have a longer term orientation. 

The lesson here though is that DIFFERENCES in interests and perspectives provide the MEANS FOR A NEGOTIATED AGREEMENT.   Negotiation scholars tell us this all the time.  Two parties often will find a resolution not by focusing on common ground, but by understanding their differences and using those to reach an agreement. In this case, the Saints and Patriots have a difference in discount rates. From that, they are able to find a mutually beneficially trade arrangement.  We should all take a page from these two teams.  Discovering our differences with other parties can pave the way to an agreement that makes both parties quite content.