What’s Relevant?

By PON Staffon / Daily, Negotiation Skills

Adapted from “Option Overload? Manage the Options on the Table,” by Chris Guthrie (professor, Vanderbilt University Law School), first published in the Negotiation newsletter, August 2007.

When choosing among multiple options, negotiators should identify and evaluate the relevant attributes of each option and, if possible, make tradeoffs among them. This approach requires us to factor in all the important information.

Researchers have found that people often are able to follow this process when making simple decisions. When facing complex decisions involving multiple options, however, we tend to oversimplify our decision-making, considering only a fraction of the available information.

Examine what happened when professor Naresh Malhotra of the Georgia Tech College of Management asked 300 heads of household to participate in a hypothetical home purchase. The participants were randomly assigned to groups that varied according to the number of houses under consideration and the amount of information provided about those houses. When the amount of information provided remained constant when considering only 5 houses, 70% of participants were able to select the house that appeared to reflect their true preferences. But when considering 25 houses, fewer than 40% made the choice that appeared to reflect their true preferences. The more options we have, the more likely we are to be overloaded with information and to make inferior decisions.

In another disturbing study, professor Judith Hibbard of the University of Oregon and her colleagues examined how several large companies select health care plans for their employees. The researchers interviewed 33 professional purchasers, each of whom was responsible for choosing health care plans for employees and their dependents. All in all, they covered 1.8 million people. Half the purchasers admitted they had trouble considering all the relevant attributes when selecting plans. Some revealed that they avoided making any tradeoffs at all among the options; 12% admitted to relying on only one factor, such as cost. Only 20% of the purchasers appeared to use a decision-making strategy that took tradeoffs fully into account. When negotiators use a simplistic approach to important decisions, they negotiate in a manner that disregards their true preferences—and those of the people they represent.

Most writing on negotiation uncritically advises you to generate as many options as possible. You’ll be ahead of the game if you understand that with the added benefits of increased options come added costs, such as difficulty reaching decisions, making decisions that do not reflect your underlying preferences, and post-decision regret. When weighing multiple options, take time to consider whether you are oversimplifying the decision process, focusing too much on negative attributes, or being distracted by irrelevant options.