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The Psychology of Negotiation

I’ve been thinking a lot lately about the psychology of negotiation.

In the negotiation course I teach at University of Toronto School of Continuing Studies a few times a year, I have consistently seen that the students are quite good at understanding their own negotiation styles, strengths and weaknesses. They understand the difference between their positions and interests. They recognize the importance of empathy in building a negotiating relationship and value the active listing and other negotiating skills we practice.

Where these students – and most negotiators, I think – have trouble is understanding the motivations and interests of their negotiating counterparts.

The major assignment for this course is to write about a recent negotiation experience, reflecting on each party’s interests and strategies, the barriers to negotiation and ways to overcome them. The course is part of a Leadership Certificate program, so many of the papers deal with work-related negotiations: new jobs, raises, internal projects, customer contracts. Others deal with personal situations: buying or renovating a home, negotiating with spouses or children.

A common thread through many of the stories is the tendency to see a negotiation as a win-lose competition (despite the usual claims of looking for a “win-win” solution).

We attribute our own emotions, wants and fears to the “other side” and assume they just want the opposite of what we want.

“I want a raise. The company doesn’t just want to pay.”
“They want more money; I want to pay less.”
“If I give them what they want, I will seem weak and they will just want more.”

Even the words we use implies a competition: “the other side”, “my opponent”, etc.

Fear of losing something or appearing weak to an opponent is a very powerful barrier to negotiation.

Loss aversion has been widely studied and documented in all aspects of decision making and plays a huge role in negotiation. In some situations, negotiators may prefer to have no agreement rather than one where they have lost a potential benefit – even a purely speculative one.

This also affects how negotiators value potential options for agreement. It is very hard to give up something we already have – or something we strongly believe we deserve – even if we stand to gain something of greater value in return. We value what we have more highly that what we may receive.

We also value our concessions in a negotiation more highly than the other person’s. Anything we give up is a big deal; if they give something up, it probably wasn’t that important in the first place.

But negotiation gains and losses are also relative. Surprisingly, many negotiators will opt for a smaller gain, or even a small loss, if they think their counterpart is losing more. This is especially true in conflict situations where the desire to punish the other party for their supposed bad behaviour can be stronger than the desire for personal benefit. (And any supposed preference for mutual benefit goes out the window completely!)

There is quite a bit of writing on all the ways we sabotage ourselves psychologically when we prepare for negotiations.

Marty Nemko, in a Psychology Today blog, says many people psych themselves out before the negotiations even start.

“Am I asking for too much?”
“What if they say no?”
“What if they take the existing offer away?”
“What other options do I have?”

The alternative is to psych ourselves up before a negotiation.

“They’re being completely unreasonable.”
“Who do they think they’re fooling?”
“Be tough. Don’t make any concessions.”

I think this is what happens in a lot of legal negotiations. Lawyers don’t want to appear weak in front of their clients or other lawyers, so they go to the other extreme and force themselves to be more aggressive and uncompromising than necessary.

Reasonable offers and small concessions are quickly rejected.

“We can do better than that.”

Many lawyers who are aggressive, uncompromising sharks at the negotiation or settlement table are actually very nice, reasonable people in real life.

I am reminded of all the movie scenes where warriors work themselves into a frenzy before rushing into battle. If a negotiation is a battle to be won, we must do the same. It’s human nature.

This is also consistent with research into the “us” and “them” dynamics of group negotiation.

To the “us” group, hostility toward “them” is perceived as loyal, cooperative behaviour. On the other hand, cooperative or conciliatory actions toward “them” is seen as disloyal to our team. This is particularly relevant for lawyers, for whom loyalty to the client is paramount.

And it is also important to clients, who expect their lawyer to be a tiger who will fight on their behalf. Simply being reasonable or realistic in negotiations can then be seen as a sign of weakness or lack of confidence in the client.

We also fear being exploited or taken advantage of by others. This prevents the open exchange of information that may be critical to a successful negotiation.

“The exchange of honest and accurate information fosters the achievement of high joint gain and, at the same time, makes one vulnerable to exploitation by a (relatively more knowledgeable) partner. To prevent exploitation and foster personal gain, negotiators can use misrepresentation and deception. Individuals in negotiations thus constantly face the question of whether they should provide accurate information to achieve high collective outcomes, or rather strategically misrepresent their preferences to foster the achievement of good personal outcomes. Because of the informational dilemma, negotiators have a fundamental reason to doubt any information from their partner.”

De Dreu, Beersma, Steinel & van Kleef (2007). The Psychology of Negotiation

The authors say this is true even when disclosing information will result in both improved individual and collective results. For example, negotiators are reluctant to reveal a (real) negotiation deadline because they think it weakens their position, even though research shows it actually speeds up concessions by one’s counterpart.

What is the point of all of this?

Simply that a better understanding of human psychology can make us better negotiators. We need to understand that our counterparts may not react the way we expect them to, especially in conflict or stressful situations.

We tend to attribute negative motives and intentions to our counterparts, which leads to lack of trust and lack of cooperation.

We may not disclose important information, and will not trust the information we are given, for fear of being exploited.

And distrust breeds distrust in return.

Both we and and our counterparts are driven, at least in part, by fear of loss, fear of appearing weak to our bosses, clients and colleagues (and in public situations, fear of public perception as well).

If we recognize these and other common psychological barriers in ourselves and our counterparts, we can avoid some of the traps we face as negotiators.

Comments

  1. Thanks for a very helpful piece Michael! It reminded me of our need for constant reflection on our practice and experience. Cognitive biases usually operate behind the scenes and it takes work to identify them! Daniel Kahneman’s fascinating book “Thinking Fast and Thinking Slow” is a great resource for digging into some of this too. I really appreciate your thoughtful analysis. Thanks.

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