Imagine yourself in these negotiating scenarios:
- After a freelance designer has finished a big project for your company, you discover some urgent extra work that you should have given him. The designer mentioned that he needs a break and is going to take a few days off. Would you approach him about doing the work, and if so, would you offer him his going rate or something higher?
- As a graduating PhD student with some impressive publications, you were invited to interview at several top-ranked universities. However, you have not received an offer from the first three schools you visited. How can you improve your performance in the talks that follow?
- Aware that the first offer put forward in a negotiation is pivotal, you weigh the list price for the car you’re about to sell. Among other factors, you wonder if it matters whether the price is a round number or a more precise one.
Together, these situations illustrate the intricacies of the opening stages of negotiation. We must answer various questions when a negotiating opportunity presents itself, not the least being whether we even recognize and seize on the opportunity in the first place. How assertive will you be in the opening stages? How can you set yourself up for success? What should your opening offer look like? Fortunately, several new research studies suggest answers that will help you start off on the right track.
Maximize the initiation stage
Regardless of how well you negotiate, you may be passing up potentially valuable opportunities to negotiate, ample research concludes. Women in particular tend to overlook or avoid negotiations that could benefit them personally. However, negotiators of both genders could profit from more broadly framing the professional and personal situations they encounter as negotiations. Most notably, individuals often pass up chances to negotiate for higher salaries, flexible work hours, and special assignments at work, and organizations often fail to negotiate new partnerships that could prove promising.
The initiation stage of negotiation has three phases, according to Roger Volkema, a professor at the IAG/PUC school of negotiation in Brazil: 1) engaging (interacting with a prospective counterpart), 2)requesting (asking for something), and 3) optimizing (maximizing the request). For example, after being offered a job at a stated salary, a candidate could mention that she had expected to be offered more (engaging), she could ask for a slightly higher salary (requesting), or she could negotiate for a significantly higher salary, perhaps offering a concession on an issue that matters less to her in return (optimizing).
To assess how assertive people are in response to negotiation opportunities, Volkema and his colleagues Ilias Kapoutsis and Andreas G. Nikolopoulos of Athens University of Economics and Business asked graduate business students in Greece to study three professional scenarios and choose from various responses to indicate how they would likely react. Our first opening vignette, in which a consultant was deciding whether or how to contact a freelancer about extra work, is one example from the study.
Participants could choose responses that varied in assertiveness, such as not contacting the freelancer (not engaging), asking him to do the work for overtime pay (requesting), and asking him to perform it at his usual rate (optimizing).
Most of the study participants indicated that they were at least willing to engage their counterpart in situations such as this. Yet participants were much less willing to make overt requests of potential counterparts, and only a few of them said that they would make the most assertive request (optimizing) among the choices given.
In a personality questionnaire, participants who made requests of their counterparts scored high on self-efficacy, or the tendency to have confidence in one’s ability to accomplish one’s goals. The researchers concluded that for negotiators to move beyond mere engagement and toward making meaningful requests of their counterparts, they must both be able to recognize negotiating opportunities and have a strong sense of self-efficacy. Past research has shown that you can improve your confidence in your ability to meet your negotiation goals—and thus your self-efficacy—by observing other negotiators who perform well during the initiation stage and by practicing your skills in relatively low-risk negotiations.
Enhance your (sense of) power
No one would blame a job applicant for entering an interview feeling powerless. After all, it may seem as if your fate is in another person’s hands and there’s little you can do to control the outcome. Unfortunately, the sense of insecurity that we feel when we negotiate for a new position can undermine our confidence and impair our performance.
Building on past research showing that asking people to write about a time when they had power increased their sense of control, a team led by Joris Lammers of the University of Cologne in Germany examined whether giving people a chance to reflect on past powerful experiences would improve how others viewed them.
In one experiment, Dutch students were randomly assigned to write about a past experience in which they either had power or lacked power. Next, they were asked to write an application letter for an actual job ad. Other participants, assigned to the role of interviewer, each read one of the letters and indicated how likely they would be to hire the candidate. Though the interviewers didn’t know about the “power prime” (the writing task), they were significantly more likely to hire participants who had written about feeling powerful than participants who had written about feeling powerless.
In a second experiment, some French undergraduate students were randomly assigned to write about a time they felt powerful, others were assigned to write about a time they felt powerless, and others received no writing assignment. Next, all the participants engaged in a 15-minute mock interview for entrance to business school. Despite being unaware of the power prime, the interviewers, most of whom were professors, chose to admit 47.1% of the baseline group (those who didn’t have a writing assignment), 68.4% of those who wrote about feeling powerful, and only 26.3% of those who wrote about feeling powerless.
More advice on launching productive negotiations
- Emotion versus reason. When you are tempted to avoid a negotiation entirely, think through whether your avoidance is motivated by emotions such as anxiety or by more rational concerns, such as the fear of wasting time and money. This analysis could lead you to reconsider your decision.
- The role of control. People who believe that they have control over their lives are less likely to be anchored by a counterpart’s opening offer than are people who believe that they have less control over their lives, one study found. As described in this article, reflecting on a time when you had more power may help.
- Snap judgments. Our first impressions of new counterparts may lead us to false conclusions that harm us in the negotiations that follow. Making time for opening small talk can inspire disclosures that lead us to a deeper understanding of each other.
Overall, the results suggest that when you are feeling nervous about an interview or other negotiation in which you sense you lack power, you may be able to significantly improve your performance by taking a quiet moment beforehand to reflect on a time when you felt more in control.
Make opening offers with precision
Think of the last opening offer you made or received in a price negotiation. How many zeros were at the end of it? Chances are, there were at least two or three.
Whether the first price quoted in a negotiation comes from the buyer or seller, it will generally be a round number rather than a precise one, Malia F. Mason of Columbia University and her coauthors confirm in a new study. They reviewed 356 opening offers that MBA and executive students made in class negotiation exercises and found that 48% contained only one digit other than zero (e.g., $500, $5 million), 49% contained only two digits other than zero (e.g., $9,200), and none were specified to the dollar place (e.g., $524). They also found evidence of the round-number phenomenon in real-world markets; for example, on the online real-estate marketplace Zillow, across all price ranges, only 2% of sellers’ list prices were specified to the dollar place.
As you likely know, the opening offer in a negotiation serves as an anchor that grounds the discussion to follow. Indeed, anchors can significantly affect the final agreed-upon price in a negotiation. Mason and colleagues set out to determine whether the round opening offers that we lean toward are more or less effective as anchors than precise offers are.
Perhaps contrary to intuition, precise first offers actually serve as more potent anchors than round ones, the researchers found. Whether they were assigned to be the buyer or the seller in a negotiation scenario, study participants made greater adjustments away from round offers than precise offers. In some of the experiments, this was even true when a precise offer (such as a $19 sale price) was less aggressive than a round offer ($20). Why? One of the experiments showed that, relative to participants who received round offers, participants who received precise opening offers perceived the offers as being more reasoned and informed.
The results suggest that precise opening offers may lend you greater credibility in your negotiations. There’s a caveat, however: Mason’s study looked at negotiations involving relatively small sums of money, from the $10 range to the $4,000 range.
By contrast, precise offers for high-value commodities (such as a house listed at $1,285,498) could seem so unusual that they backfire. Perhaps the key is to be precise enough to convey your knowledge of the commodity—say, $1,285,500 for that house—but not so precise that your strategy is transparent.
- “Initiation Behavior in Negotiations: The Moderating Role of Motivation on the Ability-Intentionality Relationship,” by Roger Volkema, Ilias Kapoutsis, and Andreas Nikolopoulos. Negotiation and Conflict Management Research, February 2013.
- “Power Gets the Job: Priming Power Improves Interview Outcomes,” by Joris Lammers, David Dubois, Derek D. Rucker, and Adam D. Galinsky. Journal of Experimental Social Psychology, in press, 2013.
- “Precise Offers Are Potent Anchors: Conciliatory Counteroffers and Attributions of Knowledge in Negotiations,” by Malia F. Mason, Alice J. Lee, Elizabeth A. Wiley, and Daniel R. Ames. Journal of Experimental Social Psychology, in press, 2013.