Negotiators often struggle with the task of bargaining with those who behave rashly, reason poorly, and act in ways that contradict their own self-interest. But as it turns out, behavior that negotiators often view as evidence of irrationality may in fact indicate something entirely different.
Examples of Irrational Negotiators at the Bargaining Table
Here’s one example. Back in 2005, the White House announced its plans to increase the amount of food aid given to countries that are in dire need of such support. As with any proposal, there were those who avidly supported the initiative and those who opposed it.
Surprisingly, however, one of the groups that opposed the proposal was a consortium of nonprofit organizations whose mission is to increase food aid to needy countries! What can explain this seemingly irrational and self-defeating behavior?
Consider how these nonprofit organizations have operated in the past. To increase food aid to foreign countries, they have partnered with American farmers to lobby the government for greater foreign aid. What do the farmers have to gain from this deal? Clearly, the more aid the U.S. government gives, the more food it will buy from U.S. farmers.
However, mindful of escalating budget deficits, the White House decided that foreign food aid could be increased only if the government could purchase the food more cheaply. To do this, the United States would have to buy the food from developing countries instead of from American farmers.
The proposal, which should have been a double-win for the nonprofits (increased food aid and increased support of poor farmers in developing countries), instead became a difficult dilemma. Supporting the proposal would require the nonprofits to weaken or even sever ties with their longstanding coalition partner, the American farmer (see also, Win-Win Negotiations: Can’t Beat Them? Join Them). This predicament explains why the nonprofits ultimately opposed the new foreign-aid proposal. Though questionable on other grounds, their decision was quite likely not irrational.
The same dynamic plays out in many negotiations. When a manager loses a star employee because she refuses to match a competitor’s salary offer, this doesn’t mean the manager is irrational. Rather, she may be constrained by an HR policy that restricts her ability to pay some employees significantly more than others. In other instances, a negotiator may be constrained because of advice from legal counsel, limited wiggle room on specific issues, promises or commitments already made to other parties, time pressure, and so on.
Irrational – or Unable? Power in Negotiations and Optimal Negotiated Agreements
In a negotiation, when a firm’s representative is unwilling to grant even seemingly reasonable concessions (see also, Four Strategies for Making Concessions), you might question his rationality—or you might try to find out how much authority he has to negotiate a comprehensive, value-maximizing deal.
Effective negotiators try to discover these constraints and help the other party overcome them rather than dismiss him as irrational.
The star employee facing a seemingly irrational and inflexible manager might ask for concessions on other issues besides salary. Receiving a higher year-end bonus, a promotion, more vacation time, or stock options might retain the employee without putting the manager in a difficult position. Finally, if a representative is heavily constrained, you may want to negotiate with someone who has greater deal-making authority.
Related Article: Trust in Negotiations
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Reciprocity at the Bargaining Table – How to Use Tradeoffs to Create Value in Integrative Negotiation Scenarios
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Adapted from “Is Your Counterpart Irrational…Really?” by Deepak Malhotra (professor, Harvard Business School), first published in the Negotiation newsletter, March 2006.