How Negotiators Can Stay on Target at the Bargaining Table

Great negotiators stick to the plan for win-win negotiations

By on / BATNA

negotiators

In her book, Sidetracked: Why Our Decisions Get Derailed, and How We Can Stick to the Plan (Harvard Business Review Press, 2013), Harvard Business School professor Francesca Gino shares a story that many negotiators will be able to relate to:

On a sunny day a few years ago, my husband and I found ourselves wandering the streets of the Gold Souk in the old part of Dubai, which both my sister, who was living in Dubai with her family at that time, and my travel guide had described as a “must see.” A souk is an Arabian marketplace where you can buy a wide range of products, including fresh food, spices, handicrafts, and even gold.


Discover how to unleash your power at the bargaining table in this free special report, BATNA Basics: Boost Your Power at the Bargaining Table, from Harvard Law School.


Our plan for the afternoon was clear: Greg and I wanted to have an enjoyable day and buy something authentic that would help us to remember the experience vividly once we were back home. We went from one tiny, packed store to the next, passing many shops with glistening gold on display. It took us little time to notice that amid the traditional shops lining the souk’s enchanted streets were other shops filled with fake designer handbags and knockoff designer clothing. Vendors ran after us, hawking “Nike” shoes, “Versace” T-shirts, “Louis Vuitton” bags, “Prada” wallets, and “Ray-Ban” sunglasses—all of them at bargain prices, and all of them closely resembling the authentic products we were familiar with from home.

One vendor was particularly persistent. He convinced Greg to follow him to the back of his store, where the two spent almost an hour haggling over “Rolex” and “Panerai” watches— identical copies of the real thing. Greg thought a fancy watch would make him look and feel good, and he doubted any of his friends or colleagues would be able to tell the difference.

After quite a bit of negotiating, he was ready to make a purchase. He had chosen a copy of a Panerai Luminor Power Reserve men’s watch, which typically sells for about $7,000 in the United States. Greg bought his perfect (in his mind) replica for just over $100.

His euphoria over getting such a good deal was short-lived. By the time we got back to our car, Greg said he couldn’t help but feel a bit fake while wearing the watch. Ironically, this sensation—feeling inauthentic—was exactly the opposite of his initial plan: having an authentic experience at the souk.

As Gino writes in Sidetracked, negotiators and other decision makers often find themselves diverging from their carefully developed plans. You might plan to be assertive in a job negotiation, but leave without asking for a higher salary. You might get so wrapped up in meeting your own needs that you neglect to address your counterpart’s, sending the negotiation off the rails. Similarly, you might overlook how aspects of the environment are influencing your behavior and that of others.

Caught up in the heat of the moment, negotiators often fail to follow through on their intentions. Through her research, Gino has identified three sets of forces that influence our decisions in ways we fail to anticipate: (1) forces from within ourselves, (2) forces from our relationships with others, and (3) forces from the outside world.

These forces can affect us independently, but perhaps more often, multiple forces can conspire against us through the course of a negotiation. In Greg’s case, for example, forces from within caused him to believe that wearing an expensive-looking watch would make him feel good—a prediction that proved to be shortsighted. Forces from his relationships caused him to aspire to increase his sense of status relative to others. And forces from the outside world, namely “the heady atmosphere of the souk,” as Gino writes, appear to have distracted him from his goal of having an authentic experience.

A better understanding of the forces that lead us astray can help us stick to the plan in negotiations and also help us decode the puzzling behavior of our counterparts. In this article, we draw from Gino’s book to examine how such forces can derail negotiations—and how we can do better.


Discover how to unleash your power at the bargaining table in this free special report, BATNA Basics: Boost Your Power at the Bargaining Table, from Harvard Law School.


1. Forces from within ourselves

Our own thoughts and feelings can be sufficient to derail our negotiations, as Gino illustrates with an amusing scene from Albert Brooks’s 1991 movie, Defending Your Life. The film centers on Brooks’s character, Daniel Miller, who dies and arrives in the afterlife, where he is required to justify his passive approach to his life on Earth.

In a flashback scene, Daniel asks his wife to help him prepare to negotiate for a higher salary. Daniel believes (and many negotiation experts would agree) that role-playing the negotiation ahead of time will increase his confidence and assertiveness.

Throughout the practice session, Daniel stands firm as his wife, acting as his boss, delivers a series of offers. When he refuses to accept less than $65,000, his wife backs down and makes some increasingly appealing offers.

The next scene shows Daniel’s negotiation with his boss as it unfolds the next day. The boss delivers an opening offer of $49,000. Daniel’s response, before the boss even finishes his sentence? “I’ll take it.”

Whether Daniel’s specific plan for his salary negotiation was a good one is debatable. The larger point, Gino writes in Sidetracked, is that once Daniel was face-to-face with his boss, anxiety overwhelmed him and derailed his plan to negotiate assertively.

Ample research supports this fictional anecdote: The emotions we experience while engaged in tasks such as negotiation often thwart us from following through on our plans. To take one example, the anger triggered by an unrelated experience can cause us to discount valuable advice, Gino and University of Pennsylvania professor Maurice Schweitzer have found in their research.

One reason negotiators have difficulty standing firm is that they fear an impasse and the negative emotions they associate with it, such as anger and frustration. This fear of impasse can cause us to abandon our plans to be assertive and cave in to the other side’s demands, Kristina Diekmann (University of Utah), Ann Tenbrunsel (University of Notre Dame), and Adam D. Galinsky (Columbia University) have found.

How can you get back on track? Take your emotional temperature whenever you are faced with an important decision, advises Gino. Reflecting on your emotional state and its source can help you determine whether it is triggered by the current situation or by an unrelated event, such as a spat with your significant other or a fender bender on the way to the office. Taking your emotional temperature may also help you better understand your counterpart’s feelings in a negotiation—for instance, if you realize your own bad mood could be influencing his.


Discover how to unleash your power at the bargaining table in this free special report, BATNA Basics: Boost Your Power at the Bargaining Table, from Harvard Law School.


2. Forces from our relationships with others

When setting strategy, most negotiators recognize the value of considering the likely moves of the party across the table. But even experienced negotiators fail to follow through on this intention, Gino discovered when she conducted field research on a long-standing conflict between Eureko, a Dutch insurance company, and the Polish government.

After Poland announced plans to privatize the nation’s leading insurance group, PZU, in 1999, Eureko acquired 30% of PZU’s shares for the equivalent of about $700 million with the goal of eventually gaining a controlling stake in the company. But the Polish government stalled on its promise to privatize PZU, and Eureko sued. In a negotiated settlement, the Polish government promised to sell another 21% of PZU shares to Eureko by the end of 2001. Once again, however, Poland stalled.

In 2003, Eureko filed an international arbitration case against Poland, seeking reimbursement of its initial purchase payment plus damages. The arbitration dragged on for five years.

In 2008, Eureko’s new chief financial officer, Gerard van Olphen, studied the conflict and wondered if Eureko was looking at the arbitration too narrowly, specifically by focusing exclusively on whether Eureko would win or lose. He called Eureko managers together and told them to analyze what would happen if Eureko won the arbitration, as was expected.

By the end of day, the team concluded that even if Eureko won, the Polish government would not pay the damages it was likely to be fined—and the decision would be unenforceable.

Eureko’s upper management abandoned the arbitration and opened up negotiations with Poland. The two parties ultimately reached a deal, and Eureko collected 4.2 billion euros from Poland.

As this story shows, being too focused on our own perspective in a negotiation or dispute can prevent us from anticipating how the other party is likely to act. Wise negotiators are able to look beyond the specifics of the negotiation at hand, Gino writes, to consider how the other side is likely to behave during the implementation stage—and make adjustments to strategy as necessary.


Discover how to unleash your power at the bargaining table in this free special report, BATNA Basics: Boost Your Power at the Bargaining Table, from Harvard Law School.


3. Forces from the outside world

In 2010, FIJI Water, a U.S. supplier of premium bottled water, and the government of Fiji, led by its prime minister and military dictator, Frank Bainimarama, became embroiled in a bitter public conflict. Due in part to government corruption and a series of natural disasters, the island nation was in the midst of a crippling financial crisis. Faced with dwindling revenues, Bainimarama’s government decided to change its taxation system—specifically, by increasing its tax on water extraction above a certain level from one-third of a Fijian cent to 15 cents per liter. The additional tax was expected to net the government $11.7 million annually.

Notably, FIJI Water was the only water bottler on the island large enough to be affected by the new tax. In response, it labeled the tax discriminatory, shut down its bottling plant—laying off 400 employees— and canceled its contracts. Calling Bainimarama’s government unstable, FIJI Water representatives publicly threatened to pull out of Fiji completely.

Ultimately, FIJI Water was reluctant to completely withdraw from Fiji, which had given the company its name and its reputation for bottling clean, pure water. After intense negotiations with the government, the company decided to accept the proposed tax increase.

Though the government won the short-term battle, its inaccurate evaluation of FIJI Water’s financial situation soured the relationship between the two parties. The government had looked at the high prices FIJI charged for its water and concluded that the company would barely notice the higher tax rate, Gino explains. The government failed to explore FIJI Water’s operations or its competitiveness in the bottled-water marketplace. In fact, FIJI Water was then just a small player in the market and was struggling to succeed, a point that company management had difficulty impressing upon Fiji government officials.

We are all susceptible to making biased attributions of others’ behavior in negotiations, writes Gino. In particular, we tend to oversimplify the impact of situational factors on others. For example, when making promotion decisions, an HR manager might fail to recognize that a high-performing salesperson in one region may lack a broader understanding of the sales process at a national level.

Our tendency to overlook the impact of situational influences on others’ behavior can lead us astray at the bargaining table. How can we overcome this tendency? Gino advises us to “consider the source”—that is, carefully assess the information on which we base evaluations of our own actions and those of others when making important decisions that will affect our negotiations.

For organizations, considering the source can mean making structural changes to the way employees’ behavior is evaluated. Companies such as Novartis have changed their performance reviews to assess not only whether employees meet their performance goals but also how they meet them. Specifically, managers collect feedback from several sources, thus allowing them to evaluate employees’ work processes as well as their outcomes.

In addition, remember that others are prone to similar errors. Don’t give people reasons to jump to negative conclusions about your character. If you want to show a counterpart that you’re eager to make a deal, for example, offer to come to her office rather than expecting her to travel to you.

Originally appearing in the April 2013 issue of Negotiation Briefings.Excerpted and adapted from Sidetracked: Why Our Decisions Get Derailed, and How We Can Stick to the Plan. Reprinted by permission of Harvard Business Review Press. Copyright© 2013 by Francesca Gino. All rights reserved.


Discover how to unleash your power at the bargaining table in this free special report, BATNA Basics: Boost Your Power at the Bargaining Table, from Harvard Law School.


Related Posts

Comments

Leave a Reply