What aren’t you noticing in your negotiations?

A new book explains why we miss key information—and how we can do better.

By on / Business Negotiations

Recently, a corporation that we’ll call Firm A was negotiating to give another company, Firm B, access to its intellectual property. The CEOs reached an oral agreement on deal terms, and the lawyers on both sides began drafting the formal contract.

At this point, Firm B asked for the right to use Firm A’s intellectual property beyond the scope of the work being specified. Firm A didn’t understand why Firm B wanted such broad, ambiguous access to its intellectual property. The demand seemed extraneous to the deal on the table, and Firm B wouldn’t explain clearly why it needed these rights. But with a $100 million–plus contract at stake, Firm A was tempted to give in to the demand.

That’s when a negotiator on Firm B’s team accidentally copied Firm A’s CEO on an internal e-mail. The e-mail revealed that Firm B had already committed criminal violations of Firm A’s intellectual property rights. Now Firm A’s negotiators understood the reason behind the unusual add-on request: Firm B was trying to cover up its past wrongdoing. The request was a clear attempt at misdirection. Firm A did reach a deal with Firm B—at much more attractive terms, due to its discovery, but with a much lower degree of trust.

Negotiators often fail to notice when someone is intentionally trying to misdirect them, writes Harvard Business School professor Max H. Bazerman in his new book, The Power of Noticing: What the Best Leaders See (Simon & Schuster, 2014). In fact, Bazerman advised Firm A in the deal described here and witnessed Firm B’s deception firsthand.

In business negotiations and other realms, the ability to focus intently can be a valuable skill. But close focus can also prevent us from noticing misdirection and other key information that’s beyond our field of vision, a phenomenon Bazerman and New York University professor Dolly Chugh refer to as bounded awareness. Disasters ranging from the fall of Enron to the Bernard Madoff scandal to the 2008 financial crisis might have been avoided, Bazerman writes in The Power of Noticing, if the decision makers involved or outside observers had noticed and acted on clear signs of trouble.

In this article, we discuss three types of “focusing failures” outlined in Bazerman’s book and outline concrete steps you can take to avoid them in your negotiations.

1. Misdirection: Learning from magicians
In negotiation, a counterpart’s behavior can be confusing: Why did she make that vague request? Did he hear that important question I just asked? At such moments, we typically decide to move forward without dwelling on our concerns.

That’s often a mistake, according to Bazerman. When a negotiator’s behavior seems irrational or otherwise unclear, it could be that he is intentionally trying to misdirect you, as Firm B tried to do to Firm A in the opening story.

To understand how misdirection operates, consider how magicians fool us into believing they have violated the laws of physics: They focus our attention “away from the key element of the trick and on some other sensory experience,” writes Bazerman in The Power of Noticing. More specifically, they misdirect their subjects with broad physical gestures that overshadow more subtle movements. That’s how the famous magician Jason Randal removed former U.S. vice president Dan Quayle’s watch from his wrist five times in less than 15 minutes.

Similarly, negotiators and other professionals sometimes go to great lengths to misdirect others from their unethical behavior, as Firm B did to Firm A. Bernard Madoff, for example, misdirected investors and regulators from his mounting investment losses by setting up an elaborate Ponzi scheme.

How can you avoid being the victim of misdirection in your negotiations? First, put yourself in your counterpart’s shoes, writes Bazerman. Think about why someone might be making an unusual request or evading an important question, and consider the possibility that he has something to hide.

Second, insist on clarity. In Bazerman’s negotiation classes, immediately after pairs of students have engaged in a negotiation simulation, one of them summarizes the agreement on the blackboard. Quite often, the other party then complains that the summary is incorrect. This type of confusion occurs, Bazerman believes, because the parties reached an oral agreement without noticing that it was ambiguous. Such misunderstandings are also common in the real world, so it’s important to carefully review the details of any agreement you reach.

2. Motivated blindness: What the expert witness didn’t see
In the spring of 2005, Bazerman served as an expert witness in the U.S. Department of Justice’s (DOJ) prosecution of the tobacco industry, which stood accused of engaging in a coordinated conspiracy to deceive the public about the health risks of cigarette smoking. Asked to determine what remedies would be appropriate if the tobacco companies were found guilty of massive fraud, Bazerman recommended significant structural changes to the industry, including the appointment of court monitors who would consider the removal of senior executives from their positions.

Four days before Bazerman’s scheduled oral court testimony, a member of the DOJ trial team asked him to amend his written testimony to note that some of his recommendations, including the removal of tobacco executives from their positions, would be inappropriate under certain legal conditions. The request originated not with the trial team but with U.S. associate attorney general Robert D. McCallum Jr., a DOJ appointee of President George W. Bush. McCallum had previously been a partner in a law firm that had represented R.J. Reynolds Tobacco Company, a defendant in the case. Bazerman was confused by the request and uncertain about the motives underlying it, and he refused to change his testimony.

As the trial drew to a close, the DOJ made a shocking move to cut its request for financial penalties from the tobacco firms from $130 billion to $10 billion, a move that later was attributed to McCallum’s interference. “The DOJ technically won the case, but the remedies were trivial,” writes Bazerman.

Weeks after the trial, an anti-tobacco activist who had participated in the same trial went public with accusations that McCallum had tried to tamper with his testimony. Suddenly realizing that he should have spoken up sooner, Bazerman told his story to the Washington Post.

In negotiation and other aspects of life, we are far less likely to notice and act on others’ unethical behavior if we have incentives to turn a blind eye, a phenomenon that Chugh, Bazerman, and their colleague Mahzarin Banaji of Harvard University refer to as motivated blindness. For example, leaders in the Catholic Church downplayed and covered up child sexual abuse by clergy for decades in the face of strong motivations to protect the church’s image.

Bazerman believes that several factors kept him from being confident that the request to change his testimony was unethical, including his own exhaustion, the ambiguity of the request, and the concern that negative publicity about the trial could hurt the DOJ’s case.

How can we be better prepared to notice and act on any unethical behavior that occurs in negotiations? First, we can minimize the distractions that may keep us from perceiving wrongdoing, such as time pressure and fatigue. Second, we can resolve in advance to investigate any hints of impropriety. Third, we can give negotiators in our organization incentives to speak up when they notice questionable behavior.

3. Indirect action: The hidden hazards of “everyday low prices”
In 2006, John R. “Cy” Elmburg, the CEO of Blitz USA, the largest U.S. manufacturer of gas cans, became aware that the gas cans his company was selling to Walmart had a faulty design that linked them to dozens of explosions, serious burns, and deaths, writes Bazerman in The Power of Noticing. Elmburg asked Walmart’s CEO to join a national consumer awareness campaign to reduce gas can explosions, only to be rebuffed.

Blitz also presented a revised gas can design to Walmart that would prevent burn injuries with the installation of a device that would cost no more than $1 per can, according to the court testimony of one former Blitz employee. Walmart, which requires its suppliers to accept full liability for any lawsuits related to their products, allegedly rejected the revised design on the basis of the price increase. Blitz scrapped the redesign project because of the difficulty of launching a national product that Walmart would shun.

“The flip side of Walmart’s policy of providing everyday low prices to its customers is its goal of securing everyday low costs for Walmart,” writes Bazerman. “The guideline given to Walmart buyers is to achieve low costs, a motto that its buyers are encouraged to live and breathe.” This goal puts such extreme price pressure on suppliers that they may avoid adding commonsense safety features for fear of losing Walmart’s business.

Blitz eventually went bankrupt due in part to its legal expenses and settlements from exploding-gas-can lawsuits. In the long run, the company’s decision to skimp on safety ended up harming both consumers and Blitz itself.

Bazerman argues that Walmart was “the driving force” in the sale of unsafe gas cans to consumers. Yet Walmart has defeated lawsuits in which it has been accused of contributing to the continued sale of dangerous products. Why? In part because of the human tendency not to notice when individuals and organizations indirectly cause harm through another party. Bazerman’s research shows that indirect harm can be particularly difficult for us to notice.

The harms created by indirect effects should challenge leaders to anticipate the problems that their organizations’ policies could create, writes Bazerman. For example, requiring negotiators to focus exclusively on meeting financial targets is likely to sacrifice other important goals, such as safety, quality, and reliability. Wise leaders foresee the potential risks of their policies and revise them accordingly.

3 steps to becoming a “first-class noticer”

In his novella The Actual, Saul Bellow refers to his protagonist, Harry Trellman, as a “first-class noticer”—a keen observer who sees what others miss. Management expert Warren Bennis has argued that being a first-class noticer is the most important leadership skill.

Although we might have different capacities for observation, in The Power of Noticing, Max H. Bazerman writes that we all have the ability to become first-class noticers. Here are three guidelines to help you improve your noticing skills in negotiation:

1. Adopt a noticing mindset. When a setback occurs in a negotiation, first-class noticers think about how they contributed to it rather than looking for reasons to blame another party. Remember that failures usually have both external and internal causes. Recognizing the role you played will help you notice and head off similar problems in the future.

2. Question conventional wisdom. Think about what faulty practices prevail in your industry that are affecting your negotiations. Do negotiators have incentives to rely on their intuition? Is price valued above all other issues? Question the status quo and promote more rational thinking.

3. Bring an outsider in. Outsiders are more likely than insiders to notice when an organization is constrained by inefficient practices and systems. Therefore, when preparing to negotiate, consider inviting a respected colleague from outside your division or organization to reflect on trouble spots and opportunities you might otherwise miss.

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