Implicit and explicit bias are common, whether or not those responsible are aware of it. A clear illustration emerged on July 14, 2015, when American Honda Finance Corporation (AHFC), the U.S. financing division of Honda, agreed to refund $24 million to minority borrowers to settle federal investigations. As reported by the Los Angeles Times, AHFC was accused of racial discrimination in negotiations over auto loans.

The case focused on pricing policies in effect from 2011 through mid-2015. Under those policies, AHFC allowed dealerships—where most AHFC loans are negotiated—to “mark up” the interest rates they received from banks and other lenders by as much as 2.25 percentage points. In practice, this meant a dealer could raise a 2% interest-rate quote to 4.25% without disclosing the markup to the borrower.

According to the U.S. Department of Justice, these discretionary markups had a disparate impact. Compared with white borrowers who had similar credit profiles, African American borrowers paid, on average, more than $250 in additional borrowing costs over the life of their loans. Latino borrowers paid more than $200 extra, while Asian and Pacific Islander borrowers paid more than $150 more.

Although it didn’t admit to wrongdoing, in addition to refunding the borrowers, AHFC agreed to limit dealer markups to 1.25 percentage points for loans of five years or less and 1 percentage point for longer-term loans.

The Honda story reflects what researchers have found in the lab: the discrimination that racial minorities sometimes face in society can extend to their negotiations. This discrimination can be blatant, in the case of outright bigotry and racist policies, but more often it is subtle and difficult to detect. The very definitions of implicit and explicit bias are whether the offender knows they’re being bias or not. In fact, negotiators who discriminate often do so unconsciously, with no awareness that their implicit biases are harming others, psychological research shows. In this article, we look at what we know about racial discrimination in negotiation and suggest ways to prevent it from affecting our own deals—whether we are in the minority or the majority.

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Implicit and explicit bias in buyer-seller negotiations

In business settings, negotiators have clear moral and legal incentives to treat people equally and avoid even the appearance of racism, yet research suggests that minorities face discrimination at the bargaining table nonetheless and are prone to both implicit and explicit bias.

In a well-known 1995 study, Yale University professor Ian Ayres trained 36 participants—some African American, some Caucasian; some male, some female—to negotiate in a similar manner for a new car. The participants then made more than 400 visits to 200 car dealerships in the Chicago area and negotiated the purchase price of a new car, following (unbeknown to the salespeople) a predetermined script. The results showed that the car dealers made significantly higher offers to African American and female buyers at both the beginning and the end of these negotiations. Ayres speculated that dealers stereotyped African Americans and women as being less knowledgeable or skilled bargainers than white males, and thus more willing to accept higher prices and less likely to negotiate concessions.

In a 2015 study, racial minorities even faced discrimination in eBay auctions, Ayres, Christine Jolls of Yale Law School, and Mahzarin R. Banaji of Harvard University found. The researchers posted pictures of baseball cards being held by either a light-skinned hand or a dark-skinned hand. Cards held by a seller who appeared to be African American sold for about 20% less than cards held by a seller who appeared to be Caucasian—though the cards held by the African American actually were more valuable overall. Because bidders were competing against not only the seller but also other bidders for the best price, the results suggest that in addition to being biased themselves, bidders may have expected others to be racially biased.

Similarly, in a 2015 study, people renting their homes on the website Airbnb (“hosts”) discriminated against would-be “guests” they believed to be African American. Harvard Business School researchers Benjamin G. Edelman, Michael Luca, and Daniel Svirsky sent messages to 6,400 hosts in five U.S. cities under names that signaled that the guest was either African American or Caucasian; guests’ profiles were otherwise identical and did not include photos. Hosts were 8% more likely to accept queries from guests with Caucasian-seeming names than guests with African American–seeming names. With the exception of African American females, who did not discriminate against other African American females, both African American and Caucasian hosts discriminated against African Americans.

“Ordinary prejudice” and explicit bias

In some cases, members of racial minorities may suffer in negotiations because they are dealing with bigots who are hostile to them because of their race (explicit bias). But evidence suggests that subconscious and unintentional racism is a far more common source of discrimination (implicit bias). Psychologists call such negotiation bias ordinary prejudice because it is widespread and arises from the ordinary processes of thought and perception.

If you believe you are immune to ordinary prejudice, visit this website and take one of the Implicit Association Tests you will find there. IAT tests—designed by researchers Anthony G. Greenwald of the University of Washington, Banaji of Harvard, and Brian A. Nosek of the University of Virginia—require us to make split-second judgments that are believed to reveal our subconscious attitudes about different categories of people, such as black or white, Republican or Democrat, young or old, and so on. Test takers, including minorities to some degree, have consistently shown a preference toward whites and a bias against racial minorities. Most people, for example, have more difficulty categorizing the word good with a black face than with a white face.

In addition, virtually all human beings tend to favor people who remind them of themselves, in terms of race, gender, religion, and so on. Due to this in-group favoritism, we may find ourselves recommending friends for jobs, writing letters of reference for neighbors’ children, and so on.

Such favors may seem benign, yet we tend to overlook the fact that they disadvantage those who are not like us, write Harvard Business School professor Max H. Bazerman and University of Notre Dame professor Ann E. Tenbrunsel in their book Blind Spots: Why We Fail to Do What’s Right and What to Do about It (Princeton University Press, 2011). The upper ranks of organizations tend to be dominated by whites, who are more likely to request favors for other whites. Often without conscious intention, whites end up perpetuating inequality and excluding racial minorities.

Racial bias in hiring and pay

In the United States, it is illegal for employers to discriminate based on race, yet researchers have found evidence of racially biased hiring practices. In a 2004 study, researchers Marianne Bertrand (University of Chicago) and Sendhil Mullainathan (Harvard University) sent out nearly 5,000 résumés in response to 1,300 help-wanted ads in Chicago and Boston newspapers for sales, administrative support, clerical, and customer service jobs at different levels. Half of the applicants were given white-sounding names (such as Emily Walsh or Greg Baker); the other half had African American–sounding names (such as Lakisha Washington or Jamal Jones). Across the industries and occupations studied, résumés for those with white-sounding names received 50% more callbacks than identical résumés for those with African American–sounding names. Having a white-sounding name provided an advantage equivalent to having eight more years of experience.

When minorities do manage to get a job interview and an offer, evidence suggests that they are paid less than whites to do the same job. In a 2000 study, researchers Marc-David L. Seidel and Katherine J. Stewart of the University of Texas at Austin and Jeffrey T. Polzer of Harvard Business School analyzed the outcomes of more than 3,000 actual starting-salary negotiations at a U.S. high-tech company from 1985 to 1995. They found that, on average, members of racial minority groups negotiated significantly lower salary increases from the hiring managers’ initial offers than whites.

Debiasing negotiations in your organization

Overall, research and survey data suggest that racial discrimination remains pervasive, if largely unintentional, across various types of business and professional negotiations. Fortunately, there are steps we can take in our organizations to promote more egalitarian negotiations.

1. Support rational decision making. Our intuitions and snap judgments tend to be more reliant on stereotypes and more biased than our more reasoned thought processes, psychological research has found. For this reason, dealmakers in your organization need ample time to negotiate and clearly reason through their decisions. You might also require them to justify their decision-making processes before making significant commitments. Finally, educate negotiators in your organization about unconscious bias and how it may be affecting their judgment.

2. Audit negotiation policies. When Honda’s financing arm allowed dealers to negotiate high loan markups, it likely did not anticipate that the policy would lead to the type of racial discrimination alleged by the U.S. government. Similarly, you may find in your own organization that certain practices are unwittingly encouraging bias against certain groups. Trace backward from undesired negotiation results to identify potential flaws in the system.

3. Improve information access. In the salary-negotiation study by Seidel and colleagues described earlier, minorities who had been referred to the high-tech company by a friend who worked there (rather than hearing about the job from an ad, a recruiter, etc.) achieved salary increases similar to those of whites. In addition to predisposing hiring managers to view applicants favorably, strong social ties may have given the applicants valuable information about the parameters of their salary negotiations, the researchers theorize. Notably, however, minority applicants were less likely than white applicants to have connected with the organization through such social ties. The findings underscore the importance of giving job applicants equal access to information that could give them an edge—for example, by posting salary parameters online.

4. Encourage joint comparisons. In a 2015 study, Harvard University researchers Iris Bohnet, Alexandra van Geen, and Max Bazerman uncovered a specific way to “nudge” negotiators toward less-biased decisions. They found that study participants playing the role of an employer were less likely to fall back on gender stereotypes when comparing a female and a male employee for a job assignment than when evaluating female and male employees one by one. This type of joint comparison appeared to enable the employers to look beyond stereotypes and focus on the employees’ past performance. In a similar manner, encouraging managers to evaluate pairs or small numbers of candidates for promotion, rather than considering candidates individually, may result in decisions that are less racially biased.

5. Increase diversity. The more we interact with people who are different from us, the less we rely on stereotypes. Thus, by taking concrete steps to reduce hiring discrimination in your organization, you can achieve a more diverse workforce and consequently promote more egalitarian negotiating behavior. For example, you might anonymize applications to prevent decision makers from discriminating against minorities during the screening process.

Have you been an offender of implicit and/or explicit bias? Have you been a victim? Share your story in the comments below.

Claim your FREE copy: Negotiation Skills

Build powerful negotiation skills and become a better dealmaker and leader. Download our FREE special report, Negotiation Skills: Negotiation Strategies and Negotiation Techniques to Help You Become a Better Negotiator, from the Program on Negotiation at Harvard Law School.

For the New York Mets, a deal with outfielder Yoenis Céspedes is all in the timing

Just because a deal isn’t working out in the present doesn’t mean it never will. That’s the key takeaway from a recent contract agreement reached between the New York Mets and star outfielder Yoenis Céspedes this past January.

A temporary impasse

Céspedes, who joined Major League Baseball in 2012 after defecting from Cuba, hit the ground running after the Mets signed him in the middle of the 2015 season, the Wall Street Journal reports. In just 57 games, the power hitter racked up 17 home runs and 44 runs batted in, filling Citi Field and propelling the Mets to their first division title since 2006. But the season ended with unfinished business for the Mets: the team lost the World Series to the Kansas City Royals.

Céspedes became a free agent at the end of the 2015 season, and many expected that the red-hot star would field huge multiyear offers, perhaps in the six-year, $130 million range. The Mets professed publicly that they had little hope of re-signing him. As thrilled as they were with Céspedes’s offensive game, they had concerns about how he’d perform as a full-time center fielder and said point-blank that they would not sign the 30-year-old to a contract that would extend into his mid-30s.

An open position

During the winter dealmaking season, Céspedes faced a crowded field of competitors and didn’t receive the eye-popping offers he had anticipated. The Washington Nationals reportedly offered him a five-year deal that he kept in his back pocket.

The Mets, meanwhile, kept busy revamping their middle infield and bullpen with impressive acquisitions. The team’s recent financial difficulties (related to the Bernard Madoff Ponzi scheme) had been resolved, and the owners showed a willingness to loosen the purse strings and build on the Mets’ World Series momentum. The team’s management was careful to leave a roster spot open in case they could entice Céspedes to return for the short term, the New York Post reports.

Two “yeses” lead to a deal

In mid-January, Mets general manager Sandy Alderson asked Brodie Van Wagenen, Céspedes’s agent, a crucial question, according to the Journal: “Does Yoenis want to come back to New York?”

Van Wagenen responded with a key question of his own: “Are you in it to win it?” He was referring, of course, to the 2016 World Series.
The answer to both questions was yes.

With these assurances on the table, over the next few days, the two sides negotiated with a spirit of compromise. “Both sides remained committed to keeping an open mind on creative deal structures,” Van Wagenen told the Journal.

Mets management focused on enticing Céspedes to accept a short-term deal. Ultimately, he agreed to a whopping $75 million, three-year contract, the highest annual average value for any free-agent position player that winter. Céspedes would receive a $10 million signing bonus, a $17.5 million salary for his first year, and $23.75 million for each of his final two seasons, in addition to several potential bonuses based on performance.

Céspedes also negotiated a rare opt-out clause from the Mets that would allow him to test the free-agent market again in 2017, when the competition is expected to be thinner than in 2016. Céspedes also negotiated a full no-trade provision—that is, the Mets won’t be able to trade him away without his permission.

The deal created flexibility by allowing the two sides to part ways if their relationship proves unsuccessful, yet both expressed optimism for the long term. “While the opt-out is there,” Van Wagenen told the press, “there’s certainly an eye toward what this relationship could become.”

Lessons from a winning deal

• “It ain’t over till it’s over.” As baseball great Yogi Berra’s famous quote suggests, negotiation, like baseball, is filled with unexpected twists and turns. If talks with a counterpart are going nowhere, leave the door open in case changing conditions make the original deal more attractive.
• Check the other side’s commitment. Before negotiating, Céspedes needed to ensure that the Mets were committed to pursuing a World Series victory. Similarly, the Mets wanted assurance that the player would be happy back in New York. Confirming each other’s level of commitment can be a smart way to build trust before getting down to business.
• Build flexibility into the deal. When one or both sides have concerns about the level of risk they may be facing, they can create flexibility by shortening contract duration and including opt-out clauses.

For the New York Mets, a deal with outfielder Yoenis Céspedes is all in the timing

Just because a deal isn’t working out in the present doesn’t mean it never will. That’s the key takeaway from a recent contract agreement reached between the New York Mets and star outfielder Yoenis Céspedes this past January.

A temporary impasse

Céspedes, who joined Major League Baseball in 2012 after defecting from Cuba, hit the ground running after the Mets signed him in the middle of the 2015 season, the Wall Street Journal reports. In just 57 games, the power hitter racked up 17 home runs and 44 runs batted in, filling Citi Field and propelling the Mets to their first division title since 2006. But the season ended with unfinished business for the Mets: the team lost the World Series to the Kansas City Royals.

Céspedes became a free agent at the end of the 2015 season, and many expected that the red-hot star would field huge multiyear offers, perhaps in the six-year, $130 million range. The Mets professed publicly that they had little hope of re-signing him. As thrilled as they were with Céspedes’s offensive game, they had concerns about how he’d perform as a full-time center fielder and said point-blank that they would not sign the 30-year-old to a contract that would extend into his mid-30s.

An open position

During the winter dealmaking season, Céspedes faced a crowded field of competitors and didn’t receive the eye-popping offers he had anticipated. The Washington Nationals reportedly offered him a five-year deal that he kept in his back pocket.

The Mets, meanwhile, kept busy revamping their middle infield and bullpen with impressive acquisitions. The team’s recent financial difficulties (related to the Bernard Madoff Ponzi scheme) had been resolved, and the owners showed a willingness to loosen the purse strings and build on the Mets’ World Series momentum. The team’s management was careful to leave a roster spot open in case they could entice Céspedes to return for the short term, the New York Post reports.

Two “yeses” lead to a deal

In mid-January, Mets general manager Sandy Alderson asked Brodie Van Wagenen, Céspedes’s agent, a crucial question, according to the Journal: “Does Yoenis want to come back to New York?”

Van Wagenen responded with a key question of his own: “Are you in it to win it?” He was referring, of course, to the 2016 World Series.
The answer to both questions was yes.

With these assurances on the table, over the next few days, the two sides negotiated with a spirit of compromise. “Both sides remained committed to keeping an open mind on creative deal structures,” Van Wagenen told the Journal.

Mets management focused on enticing Céspedes to accept a short-term deal. Ultimately, he agreed to a whopping $75 million, three-year contract, the highest annual average value for any free-agent position player that winter. Céspedes would receive a $10 million signing bonus, a $17.5 million salary for his first year, and $23.75 million for each of his final two seasons, in addition to several potential bonuses based on performance.

Céspedes also negotiated a rare opt-out clause from the Mets that would allow him to test the free-agent market again in 2017, when the competition is expected to be thinner than in 2016. Céspedes also negotiated a full no-trade provision—that is, the Mets won’t be able to trade him away without his permission.

The deal created flexibility by allowing the two sides to part ways if their relationship proves unsuccessful, yet both expressed optimism for the long term. “While the opt-out is there,” Van Wagenen told the press, “there’s certainly an eye toward what this relationship could become.”

Lessons from a winning deal

• “It ain’t over till it’s over.” As baseball great Yogi Berra’s famous quote suggests, negotiation, like baseball, is filled with unexpected twists and turns. If talks with a counterpart are going nowhere, leave the door open in case changing conditions make the original deal more attractive.
• Check the other side’s commitment. Before negotiating, Céspedes needed to ensure that the Mets were committed to pursuing a World Series victory. Similarly, the Mets wanted assurance that the player would be happy back in New York. Confirming each other’s level of commitment can be a smart way to build trust before getting down to business.
• Build flexibility into the deal. When one or both sides have concerns about the level of risk they may be facing, they can create flexibility by shortening contract duration and including opt-out clauses.

Filmmaker Nate Parker sticks to his dreams in a heated “negotiauction.”

Most sellers dream about driving up the price of a commodity in a bidding war. But how can you stay true to your nonfinancial goals in an auction fixated on price? Nate Parker, the filmmaker, star, and producer behind the film The Birth of a Nation, and his representatives answered that question in their handling of negotiations for the sale of the film’s worldwide distribution rights at the Sundance Film Festival this past January.

A red-carpet release

When introducing his film in Sundance, Colorado, this winter, Parker received a standing ovation even before the film was screened.

The film had hit Sundance with no small amount of hype. Even the story of how it came to be was Oscar worthy: Parker had quit other acting jobs for two years to write, produce, direct, and star in the film, a drama about Nat Turner’s slave rebellion in the 1830s. Spending $100,000 of his own money on the film, he flew around the country lining up investors, including at least two pro basketball players.

At Sundance, The Birth of a Nation, like Parker himself, garnered a standing ovation.

For industry reps from Los Angeles, the film seemed likely to follow in the footsteps of recent successful historical dramas focused on and starring African Americans, including 12 Years a Slave and Django Unchained. And with the Oscars under fire for their all-white acting nominations for 2015, it was a good time for a high-quality film about the African American experience to emerge.

The frenzy begins

The sharks began circling Parker at the film premiere’s after-party, held at a lounge on Sundance’s Main Street. The agent representing The Birth of a Nation, Graham Taylor of William Morris Endeavor, set a $12 million minimum bid in order to gain a sit-down with Parker and the film’s other producers. Taylor also said they were expecting a deal in the $15–$20 million range and a 2016 theatrical release, according to entertainment news blog The Wrap.

Those stipulations narrowed the bidding down to a handful of traditional film studios, including Fox Searchlight, The Weinstein Company (TWC), Paramount, and Sony. Two less-established contenders also made a play for the film. The first was Netflix, which, along with its rival Amazon Prime, had gone on a spending spree at Sundance, buying up subscription video-on-demand (SVOD) rights to indie films. The second was African American media mogul Byron Allen’s Entertainment Studios, a TV production company trying to branch into feature-film distribution.
The first formal pitch came at around 11 p.m. from Fox Searchlight, according to the Hollywood Reporter. Having nurtured 12 Years a Slave to box office and critical success—the film won the 2014 Best Picture Oscar—the studio’s executives “believed they knew how to handle Parker’s baby,” according to The Wrap.

Late-night bargaining

Around midnight, Parker and the other producers decamped to a hotel to meet with producers Harvey Weinstein and David Glasser of TWC. Weinstein said he could bid up to $14 million, an offer that Taylor took to the other interested bidders. Deep into the night, offers from Paramount and Sony drove the bidding up to $15 million.

Allen of Entertainment Studios reportedly made a passionate pitch that he was the right man to bring The Birth of a Nation to a wide audience. Entertainment Studios and Netflix were believed to have each offered a staggering $20 million for the rights to the film, according to The Wrap.

In the end, though, Fox Searchlight was the winner, with a $17.5 million bid for worldwide rights to the film—reportedly the largest sum ever paid for a film at any festival.

A “negotiauction” success

Why didn’t Parker and the film’s other producers go with an even higher offer? Entertainment Studios was a wild card with no track record to prove its abilities. And Netflix was insisting on pairing a theatrical release with an SVOD release, which would have jeopardized the box office splash that Parker and his team envisioned.

By allowing the most promising bidders to negotiate privately with The Birth of a Nation’s producers, the film’s agents ensured that issues other than price—such as the shared vision and experience that Fox Searchlight was able to demonstrate—wouldn’t get lost in the bidding frenzy. When planned with care, this type of negotiauction, or negotiation-auction hybrid, can help sellers maximize the price competition of auctions as well as the one-on-one discussions possible only in negotiations, writes Harvard Business School and Harvard Law School professor Guhan Subramanian in his book Dealmaking: The New Strategy of Negotiauctions (W. W. Norton & Company, 2011).

In the end, Searchlight executives won Parker over by listening to his ideas about how to release the film, including his hope to show it in high schools and colleges. “It just felt like we were speaking the same language,” Parker told the Reporter.

Filmmaker Nate Parker sticks to his dreams in a heated “negotiauction.”

Most sellers dream about driving up the price of a commodity in a bidding war. But how can you stay true to your nonfinancial goals in an auction fixated on price? Nate Parker, the filmmaker, star, and producer behind the film The Birth of a Nation, and his representatives answered that question in their handling of negotiations for the sale of the film’s worldwide distribution rights at the Sundance Film Festival this past January.

A red-carpet release

When introducing his film in Sundance, Colorado, this winter, Parker received a standing ovation even before the film was screened.

The film had hit Sundance with no small amount of hype. Even the story of how it came to be was Oscar worthy: Parker had quit other acting jobs for two years to write, produce, direct, and star in the film, a drama about Nat Turner’s slave rebellion in the 1830s. Spending $100,000 of his own money on the film, he flew around the country lining up investors, including at least two pro basketball players.

At Sundance, The Birth of a Nation, like Parker himself, garnered a standing ovation.

For industry reps from Los Angeles, the film seemed likely to follow in the footsteps of recent successful historical dramas focused on and starring African Americans, including 12 Years a Slave and Django Unchained. And with the Oscars under fire for their all-white acting nominations for 2015, it was a good time for a high-quality film about the African American experience to emerge.

The frenzy begins

The sharks began circling Parker at the film premiere’s after-party, held at a lounge on Sundance’s Main Street. The agent representing The Birth of a Nation, Graham Taylor of William Morris Endeavor, set a $12 million minimum bid in order to gain a sit-down with Parker and the film’s other producers. Taylor also said they were expecting a deal in the $15–$20 million range and a 2016 theatrical release, according to entertainment news blog The Wrap.

Those stipulations narrowed the bidding down to a handful of traditional film studios, including Fox Searchlight, The Weinstein Company (TWC), Paramount, and Sony. Two less-established contenders also made a play for the film. The first was Netflix, which, along with its rival Amazon Prime, had gone on a spending spree at Sundance, buying up subscription video-on-demand (SVOD) rights to indie films. The second was African American media mogul Byron Allen’s Entertainment Studios, a TV production company trying to branch into feature-film distribution.
The first formal pitch came at around 11 p.m. from Fox Searchlight, according to the Hollywood Reporter. Having nurtured 12 Years a Slave to box office and critical success—the film won the 2014 Best Picture Oscar—the studio’s executives “believed they knew how to handle Parker’s baby,” according to The Wrap.

Late-night bargaining

Around midnight, Parker and the other producers decamped to a hotel to meet with producers Harvey Weinstein and David Glasser of TWC. Weinstein said he could bid up to $14 million, an offer that Taylor took to the other interested bidders. Deep into the night, offers from Paramount and Sony drove the bidding up to $15 million.

Allen of Entertainment Studios reportedly made a passionate pitch that he was the right man to bring The Birth of a Nation to a wide audience. Entertainment Studios and Netflix were believed to have each offered a staggering $20 million for the rights to the film, according to The Wrap.

In the end, though, Fox Searchlight was the winner, with a $17.5 million bid for worldwide rights to the film—reportedly the largest sum ever paid for a film at any festival.

A “negotiauction” success

Why didn’t Parker and the film’s other producers go with an even higher offer? Entertainment Studios was a wild card with no track record to prove its abilities. And Netflix was insisting on pairing a theatrical release with an SVOD release, which would have jeopardized the box office splash that Parker and his team envisioned.

By allowing the most promising bidders to negotiate privately with The Birth of a Nation’s producers, the film’s agents ensured that issues other than price—such as the shared vision and experience that Fox Searchlight was able to demonstrate—wouldn’t get lost in the bidding frenzy. When planned with care, this type of negotiauction, or negotiation-auction hybrid, can help sellers maximize the price competition of auctions as well as the one-on-one discussions possible only in negotiations, writes Harvard Business School and Harvard Law School professor Guhan Subramanian in his book Dealmaking: The New Strategy of Negotiauctions (W. W. Norton & Company, 2011).

In the end, Searchlight executives won Parker over by listening to his ideas about how to release the film, including his hope to show it in high schools and colleges. “It just felt like we were speaking the same language,” Parker told the Reporter.

The Obama administration capitalized on its recent nuclear deal with Iran to secure the release of Americans imprisoned in the Middle Eastern nation.

In recent years, the United States has urged Iran to release a number of Americans, including Washington Post reporter Jason Rezaian, who had been seized and imprisoned on what the U.S. government called baseless espionage charges. Yet with diplomatic relations between the two longtime antagonists frozen, it wasn’t until they made headway on an agreement regarding Iran’s nuclear program that the U.S. government was able to gain the leverage it needed to bring the prisoners home.

Wendy Sherman, the top U.S. negotiator in the nuclear deal with Iran, told the New Yorker that the prisoner-swap negotiations were in some ways harder than the far more technically complex nuclear negotiations because they “were about American citizens, human lives, the pain of their families, the pain of their daily existence.”

As we will see, the talks provided a slew of other challenges. The story suggests how professional negotiators can look for leverage when trust between parties is low.

Negotiating framing and scope

In early 2014, Iran and the five permanent members of the U.N. Security Council, including the United States, began meeting to negotiate the dismantling of parts of Iran’s nuclear program in exchange for sanctions relief.

That October, U.S. president Barack Obama assigned Brett McGurk, his special envoy in the global fight against ISIS (Islamic State of Iraq and al-Sham), to lead separate, bilateral secret talks with Iran over the release of U.S. prisoners, according to the New York Times. The Iranians put together their own team of negotiators from the country’s state security apparatus. As compared with the more moderate Iranians participating in the nuclear talks, those involved in the prisoner negotiations represented more hard-line Iranian factions.
Initially, the Iranians provided a list of about 40 prisoners they wanted to see freed from the United States and other nations. The Americans quickly rejected the idea of trying to free those held abroad, but approached the White House about the possibility of a prisoner swap.

The U.S. Justice Department and the Obama administration debated the question. U.S. attorney general Loretta E. Lynch objected to the idea of trading Iranians—who had been held and in some cases convicted of wrongdoing according to Western legal standards—for innocent Americans seized on spurious charges in Iran. President Obama believed a prisoner swap offered the best hope of freeing Americans from Iranian prisons, but to meet Lynch’s concerns and avoid setting a precedent, he decided to frame the swap as a “one-time gesture,” officials told the Times.
The Americans came up with a list of four Iranian Americans whom it wanted freed, including Rezaian and Marine veteran Amir Hekmati. Meanwhile, Iran provided a list of 19 Iranians being held in the United States whom it wanted released. Lynch’s department and other U.S. agencies scrutinized each case. After excluding those being held on charges related to violence or terrorism, they were left with a list of seven Iranians accused or convicted of violating sanctions or export restrictions.

From argument to opening

The American and Iranian negotiating teams met every four to six weeks to try to hammer out a prisoner swap, usually in Geneva, with Swiss officials managing the logistics of the trade on behalf of the U.S. government, according to the New York Times. Thanks to his official role as U.S. special envoy against ISIS, McGurk was able to moonlight as the American leader of the secret prisoner negotiations without attracting public attention.

Until the nuclear deal was reached in July 2015, the two sides in the prisoner-swap negotiations “spent more time arguing than agreeing,” the Times reports. The Iranian negotiators devoted significant time to berating their American counterparts over historical grievances, including a CIA-backed coup dating back to 1953.

Amid the ongoing nuclear negotiations, U.S. secretary of state John Kerry and American-educated Iranian foreign minister Mohammad Javad Zarif occasionally put their heads together to discuss the prisoners, but always in separate meetings. They worried that the sensitive issue could disrupt the fragile progress being made in the nuclear talks—and the United States reportedly feared endangering the prisoners further if news of the talks went public.

After the Iran nuclear agreement was finalized in July 2015, negotiations over the prisoners began to progress. “The feeling was, we got this really big thing done, we have better diplomatic openings,” one Obama administration official told the Huffington Post. “Now we can focus on the prisoners.”

Setbacks and delays

By the fall of 2015, U.S. negotiators believed that the prisoner deal was almost sealed, according to the Times. The United States would free seven Iranians and rescind international arrest warrants on 14 others in exchange for the release of the four Americans.

But in November, the American team was stunned when the Iranian team opened a new round of sessions in Geneva by reverting to their initial demand for dozens of Iranians to be released. Believing that someone in Iran was trying to scuttle the deal, McGurk and his team walked out. On the sidelines of Syria negotiations in October, Kerry and Zarif, who had built trust and rapport while hammering out the nuclear deal, stepped in and helped the prisoner negotiations get back on track.

Other bumps in the road followed. In December, after Iran arrested an American who was studying Farsi in Tehran, the American negotiators told the Iranians that they expected his release but would not include him in the official talks, lest Iran demand that more Iranians be released in return.

On December 29, Zarif learned that the United States was planning to announce new sanctions on Iran’s ballistic missile program the next day. The news was likely to anger those behind the prisoner deal and cause it to blow up, he warned Kerry. The Obama administration decided not to reveal the sanctions until after the prisoner swap, but Congress got wind of the delay and accused Obama of backtracking on his promises to hold Iran accountable for its ballistic missile program, according to the Huffington Post. Because the prisoner swap remained top secret, Obama was unable to explain the delay.

As 2016 dawned, it became clear that the prisoner-swap negotiations would be wrapping up right around the time that the United States and other nations were expected to lift economic sanctions against Iran. But on January 12, as both deals were about to be consummated, two U.S. Navy patrol boats drifted into Iranian waters, and Iran detained 10 U.S. sailors. Once again, Kerry placed a flurry of calls to Zarif. The sailors were released the next morning.

One day, two breaking stories

On January 16, the International Atomic Energy Agency reported that Iran was complying with the terms of the multistate nuclear agreement, news that prompted the United States, European Union, and United Nations to officially lift their longtime sanctions against Iran.

The same day, Iran preempted a planned U.S. announcement of the prisoner swap with its own announcement of the deal. One of the four American prisoners, plus the recently detained student, were released; one took a commercial flight home, and the other chose to stay in Iran.

The other three Americans, including Post reporter Rezaian, were taken to the airport to fly out on a Swiss plane. Yet down to the final hours, the drama continued: Rezaian’s mother and wife, who were in Iran awaiting his release, suddenly were nowhere to be found. Iranian officials eventually said they would not be permitted to fly out with Rezaian. Once again, urgent communications between Kerry and Zarif were needed. Finally, Rezaian, his relatives, and the final two American detainees were released.

Moving forward when trust is low

The following guidelines can help negotiators forge a deal even when they aren’t sure they can trust each other.

1. Build on past successes. The prisoner swap depended in large part on the success of the Iran nuclear deal, which created a sense of optimism that the longtime enemies were capable of reaching common ground. If a deal seems impossible, wait for breakthroughs on other fronts and try to capitalize on them.

2. Line up internal support. The Obama administration was careful to listen to the Justice Department’s concerns about a prisoner swap and look for ways to address them. To keep factions on your team from sabotaging a deal, ask for their input early in the process, and try to negotiate terms that will give you the bargaining power you need. The more united your side is, the more trustworthy you will seem to the other side.

3. Protect the deal from scrutiny. Publicity can easily sabotage a sensitive deal. When trust is low, parties need privacy to take the risk of brainstorming proposals and testing the other side’s intentions.

4. Kick it upstairs—judiciously. McGurk and his team handled day-to-day negotiations with the Iranian team. But when the Iranians pulled some surprise moves, the Americans contacted Kerry, who drew on his rapport with the moderate Zarif to resolve tensions. In your own negotiations, higher-ups may be able to break through impasse and ease conflict by connecting with leaders from the other side.

The Obama administration capitalized on its recent nuclear deal with Iran to secure the release of Americans imprisoned in the Middle Eastern nation.

In recent years, the United States has urged Iran to release a number of Americans, including Washington Post reporter Jason Rezaian, who had been seized and imprisoned on what the U.S. government called baseless espionage charges. Yet with diplomatic relations between the two longtime antagonists frozen, it wasn’t until they made headway on an agreement regarding Iran’s nuclear program that the U.S. government was able to gain the leverage it needed to bring the prisoners home.

Wendy Sherman, the top U.S. negotiator in the nuclear deal with Iran, told the New Yorker that the prisoner-swap negotiations were in some ways harder than the far more technically complex nuclear negotiations because they “were about American citizens, human lives, the pain of their families, the pain of their daily existence.”

As we will see, the talks provided a slew of other challenges. The story suggests how professional negotiators can look for leverage when trust between parties is low.

Negotiating framing and scope

In early 2014, Iran and the five permanent members of the U.N. Security Council, including the United States, began meeting to negotiate the dismantling of parts of Iran’s nuclear program in exchange for sanctions relief.

That October, U.S. president Barack Obama assigned Brett McGurk, his special envoy in the global fight against ISIS (Islamic State of Iraq and al-Sham), to lead separate, bilateral secret talks with Iran over the release of U.S. prisoners, according to the New York Times. The Iranians put together their own team of negotiators from the country’s state security apparatus. As compared with the more moderate Iranians participating in the nuclear talks, those involved in the prisoner negotiations represented more hard-line Iranian factions.
Initially, the Iranians provided a list of about 40 prisoners they wanted to see freed from the United States and other nations. The Americans quickly rejected the idea of trying to free those held abroad, but approached the White House about the possibility of a prisoner swap.

The U.S. Justice Department and the Obama administration debated the question. U.S. attorney general Loretta E. Lynch objected to the idea of trading Iranians—who had been held and in some cases convicted of wrongdoing according to Western legal standards—for innocent Americans seized on spurious charges in Iran. President Obama believed a prisoner swap offered the best hope of freeing Americans from Iranian prisons, but to meet Lynch’s concerns and avoid setting a precedent, he decided to frame the swap as a “one-time gesture,” officials told the Times.
The Americans came up with a list of four Iranian Americans whom it wanted freed, including Rezaian and Marine veteran Amir Hekmati. Meanwhile, Iran provided a list of 19 Iranians being held in the United States whom it wanted released. Lynch’s department and other U.S. agencies scrutinized each case. After excluding those being held on charges related to violence or terrorism, they were left with a list of seven Iranians accused or convicted of violating sanctions or export restrictions.

From argument to opening

The American and Iranian negotiating teams met every four to six weeks to try to hammer out a prisoner swap, usually in Geneva, with Swiss officials managing the logistics of the trade on behalf of the U.S. government, according to the New York Times. Thanks to his official role as U.S. special envoy against ISIS, McGurk was able to moonlight as the American leader of the secret prisoner negotiations without attracting public attention.

Until the nuclear deal was reached in July 2015, the two sides in the prisoner-swap negotiations “spent more time arguing than agreeing,” the Times reports. The Iranian negotiators devoted significant time to berating their American counterparts over historical grievances, including a CIA-backed coup dating back to 1953.

Amid the ongoing nuclear negotiations, U.S. secretary of state John Kerry and American-educated Iranian foreign minister Mohammad Javad Zarif occasionally put their heads together to discuss the prisoners, but always in separate meetings. They worried that the sensitive issue could disrupt the fragile progress being made in the nuclear talks—and the United States reportedly feared endangering the prisoners further if news of the talks went public.

After the Iran nuclear agreement was finalized in July 2015, negotiations over the prisoners began to progress. “The feeling was, we got this really big thing done, we have better diplomatic openings,” one Obama administration official told the Huffington Post. “Now we can focus on the prisoners.”

Setbacks and delays

By the fall of 2015, U.S. negotiators believed that the prisoner deal was almost sealed, according to the Times. The United States would free seven Iranians and rescind international arrest warrants on 14 others in exchange for the release of the four Americans.

But in November, the American team was stunned when the Iranian team opened a new round of sessions in Geneva by reverting to their initial demand for dozens of Iranians to be released. Believing that someone in Iran was trying to scuttle the deal, McGurk and his team walked out. On the sidelines of Syria negotiations in October, Kerry and Zarif, who had built trust and rapport while hammering out the nuclear deal, stepped in and helped the prisoner negotiations get back on track.

Other bumps in the road followed. In December, after Iran arrested an American who was studying Farsi in Tehran, the American negotiators told the Iranians that they expected his release but would not include him in the official talks, lest Iran demand that more Iranians be released in return.

On December 29, Zarif learned that the United States was planning to announce new sanctions on Iran’s ballistic missile program the next day. The news was likely to anger those behind the prisoner deal and cause it to blow up, he warned Kerry. The Obama administration decided not to reveal the sanctions until after the prisoner swap, but Congress got wind of the delay and accused Obama of backtracking on his promises to hold Iran accountable for its ballistic missile program, according to the Huffington Post. Because the prisoner swap remained top secret, Obama was unable to explain the delay.

As 2016 dawned, it became clear that the prisoner-swap negotiations would be wrapping up right around the time that the United States and other nations were expected to lift economic sanctions against Iran. But on January 12, as both deals were about to be consummated, two U.S. Navy patrol boats drifted into Iranian waters, and Iran detained 10 U.S. sailors. Once again, Kerry placed a flurry of calls to Zarif. The sailors were released the next morning.

One day, two breaking stories

On January 16, the International Atomic Energy Agency reported that Iran was complying with the terms of the multistate nuclear agreement, news that prompted the United States, European Union, and United Nations to officially lift their longtime sanctions against Iran.

The same day, Iran preempted a planned U.S. announcement of the prisoner swap with its own announcement of the deal. One of the four American prisoners, plus the recently detained student, were released; one took a commercial flight home, and the other chose to stay in Iran.

The other three Americans, including Post reporter Rezaian, were taken to the airport to fly out on a Swiss plane. Yet down to the final hours, the drama continued: Rezaian’s mother and wife, who were in Iran awaiting his release, suddenly were nowhere to be found. Iranian officials eventually said they would not be permitted to fly out with Rezaian. Once again, urgent communications between Kerry and Zarif were needed. Finally, Rezaian, his relatives, and the final two American detainees were released.

Moving forward when trust is low

The following guidelines can help negotiators forge a deal even when they aren’t sure they can trust each other.

1. Build on past successes. The prisoner swap depended in large part on the success of the Iran nuclear deal, which created a sense of optimism that the longtime enemies were capable of reaching common ground. If a deal seems impossible, wait for breakthroughs on other fronts and try to capitalize on them.

2. Line up internal support. The Obama administration was careful to listen to the Justice Department’s concerns about a prisoner swap and look for ways to address them. To keep factions on your team from sabotaging a deal, ask for their input early in the process, and try to negotiate terms that will give you the bargaining power you need. The more united your side is, the more trustworthy you will seem to the other side.

3. Protect the deal from scrutiny. Publicity can easily sabotage a sensitive deal. When trust is low, parties need privacy to take the risk of brainstorming proposals and testing the other side’s intentions.

4. Kick it upstairs—judiciously. McGurk and his team handled day-to-day negotiations with the Iranian team. But when the Iranians pulled some surprise moves, the Americans contacted Kerry, who drew on his rapport with the moderate Zarif to resolve tensions. In your own negotiations, higher-ups may be able to break through impasse and ease conflict by connecting with leaders from the other side.

Both implicit and explicit bias can disadvantage racial minorities at the bargaining table. Here’s what to do about it.

On July 14, 2015, American Honda Finance Corporation (AHFC), the U.S. financing division of Japanese car manufacturer Honda, agreed to refund $24 million to minority borrowers to settle federal investigations. AHFC was alleged to have racially discriminated against the borrowers in negotiations over their auto loans, as reported by the Los Angeles Times. Due to pricing policies in place from 2011 through mid-2015, AHFC gave dealerships (where most AHFC loans are negotiated) permission to “mark up” the interest rates they received from banks and other lenders on individual loans by up to 2.25 percentage points. For example, a dealer could mark up a 2% interest-rate quote from a bank to 4.25% without telling the borrower about the markup. Relative to white borrowers with similar credit histories, African Americans, on average, paid more than $250 in additional borrowing costs over the duration of their loans, according to the U.S. Justice Department. Latinos paid more than $200 in added costs, and Asian and Pacific Islanders paid more than $150 extra.

Although it didn’t admit to wrongdoing, in addition to refunding the borrowers, AHFC agreed to limit dealer markups to 1.25 percentage points for loans of five years or less and 1 percentage point for longer-term loans.

The Honda story reflects what researchers have found in the lab: the discrimination that racial minorities sometimes face in society can extend to their negotiations. This discrimination can be blatant, in the case of outright bigotry and racist policies, but more often it is subtle and difficult to detect. In fact, negotiators who discriminate often do so unconsciously, with no awareness that their implicit biases are harming others, psychological research shows. In this article, we look at what we know about racial discrimination in negotiation and suggest ways to prevent it from affecting our own deals—whether we are in the minority or the majority.

Racial bias in buyer-seller negotiations

In business settings, negotiators have clear moral and legal incentives to treat people equally and avoid even the appearance of racism, yet research suggests that minorities face discrimination at the bargaining table nonetheless.

In a well-known 1995 study, Yale University professor Ian Ayres trained 36 participants—some African American, some Caucasian; some male, some female—to negotiate in a similar manner for a new car. The participants then made more than 400 visits to 200 car dealerships in the Chicago area and negotiated the purchase price of a new car, following (unbeknown to the salespeople) a predetermined script. The results showed that the car dealers made significantly higher offers to African American and female buyers at both the beginning and the end of these negotiations. Ayres speculated that dealers stereotyped African Americans and women as being less knowledgeable or skilled bargainers than white males, and thus more willing to accept higher prices and less likely to negotiate concessions.

In a 2015 study, racial minorities even faced discrimination in eBay auctions, Ayres, Christine Jolls of Yale Law School, and Mahzarin R. Banaji of Harvard University found. The researchers posted pictures of baseball cards being held by either a light-skinned hand or a dark-skinned hand. Cards held by a seller who appeared to be African American sold for about 20% less than cards held by a seller who appeared to be Caucasian—though the cards held by the African American actually were more valuable overall. Because bidders were competing against not only the seller but also other bidders for the best price, the results suggest that in addition to being biased themselves, bidders may have expected others to be racially biased.
Similarly, in a 2015 study, people renting their homes on the website Airbnb (“hosts”) discriminated against would-be “guests” they believed to be African American. Harvard Business School researchers Benjamin G. Edelman, Michael Luca, and Daniel Svirsky sent messages to 6,400 hosts in five U.S. cities under names that signaled that the guest was either African American or Caucasian; guests’ profiles were otherwise identical and did not include photos. Hosts were 8% more likely to accept queries from guests with Caucasian-seeming names than guests with African American–seeming names. With the exception of African American females, who did not discriminate against other African American females, both African American and Caucasian hosts discriminated against African Americans.

“Ordinary prejudice”

In some cases, members of racial minorities may suffer in negotiations because they are dealing with bigots who are hostile to them because of their race. But evidence suggests that subconscious and unintentional racism is a far more common source of discrimination. Psychologists call such bias ordinary prejudice because it is widespread and arises from the ordinary processes of thought and perception.

If you believe you are immune to ordinary prejudice, visit the website http://implicit.harvard.edu/implicit and take one of the Implicit Association Tests you will find there. IAT tests—designed by researchers Anthony G. Greenwald of the University of Washington, Banaji of Harvard, and Brian A. Nosek of the University of Virginia—require us to make split-second judgments that are believed to reveal our subconscious attitudes about different categories of people, such as black or white, Republican or Democrat, young or old, and so on. Test takers, including minorities to some degree, have consistently shown a preference toward whites and a bias against racial minorities. Most people, for example, have more difficulty categorizing the word good with a black face than with a white face.

In addition, virtually all human beings tend to favor people who remind them of themselves, in terms of race, gender, religion, and so on. Due to this in-group favoritism, we may find ourselves recommending friends for jobs, writing letters of reference for neighbors’ children, and so on.

Such favors may seem benign, yet we tend to overlook the fact that they disadvantage those who are not like us, write Harvard Business School professor Max H. Bazerman and University of Notre Dame professor Ann E. Tenbrunsel in their book Blind Spots: Why We Fail to Do What’s Right and What to Do about It (Princeton University Press, 2011). The upper ranks of organizations tend to be dominated by whites, who are more likely to request favors for other whites. Often without conscious intention, whites end up perpetuating inequality and excluding racial minorities.

Racial bias in hiring and pay

In the United States, it is illegal for employers to discriminate based on race, yet researchers have found evidence of racially biased hiring practices. In a 2004 study, researchers Marianne Bertrand (University of Chicago) and Sendhil Mullainathan (Harvard University) sent out nearly 5,000 résumés in response to 1,300 help-wanted ads in Chicago and Boston newspapers for sales, administrative support, clerical, and customer service jobs at different levels. Half of the applicants were given white-sounding names (such as Emily Walsh or Greg Baker); the other half had African American–sounding names (such as Lakisha Washington or Jamal Jones). Across the industries and occupations studied, résumés for those with white-sounding names received 50% more callbacks than identical résumés for those with African American–sounding names. Having a white-sounding name provided an advantage equivalent to having eight more years of experience.

When minorities do manage to get a job interview and an offer, evidence suggests that they are paid less than whites to do the same job. In a 2000 study, researchers Marc-David L. Seidel and Katherine J. Stewart of the University of Texas at Austin and Jeffrey T. Polzer of Harvard Business School analyzed the outcomes of more than 3,000 actual starting-salary negotiations at a U.S. high-tech company from 1985 to 1995. They found that, on average, members of racial minority groups negotiated significantly lower salary increases from the hiring managers’ initial offers than whites.

Debiasing negotiations in your organization

Overall, research and survey data suggest that racial discrimination remains pervasive, if largely unintentional, across various types of business and professional negotiations. Fortunately, there are steps we can take in our organizations to promote more egalitarian negotiations.

1. Support rational decision making. Our intuitions and snap judgments tend to be more reliant on stereotypes and more biased than our more reasoned thought processes, psychological research has found. For this reason, dealmakers in your organization need ample time to negotiate and clearly reason through their decisions. You might also require them to justify their decision-making processes before making significant commitments. Finally, educate negotiators in your organization about unconscious bias and how it may be affecting their judgment.

2. Audit negotiation policies. When Honda’s financing arm allowed dealers to negotiate high loan markups, it likely did not anticipate that the policy would lead to the type of racial discrimination alleged by the U.S. government. Similarly, you may find in your own organization that certain practices are unwittingly encouraging bias against certain groups. Trace backward from undesired negotiation results to identify potential flaws in the system.

3. Improve information access. In the salary-negotiation study by Seidel and colleagues described earlier, minorities who had been referred to the high-tech company by a friend who worked there (rather than hearing about the job from an ad, a recruiter, etc.) achieved salary increases similar to those of whites. In addition to predisposing hiring managers to view applicants favorably, strong social ties may have given the applicants valuable information about the parameters of their salary negotiations, the researchers theorize. Notably, however, minority applicants were less likely than white applicants to have connected with the organization through such social ties. The findings underscore the importance of giving job applicants equal access to information that could give them an edge—for example, by posting salary parameters online.

4. Encourage joint comparisons. In a 2015 study, Harvard University researchers Iris Bohnet, Alexandra van Geen, and Max Bazerman uncovered a specific way to “nudge” negotiators toward less-biased decisions. They found that study participants playing the role of an employer were less likely to fall back on gender stereotypes when comparing a female and a male employee for a job assignment than when evaluating female and male employees one by one. This type of joint comparison appeared to enable the employers to look beyond stereotypes and focus on the employees’ past performance. In a similar manner, encouraging managers to evaluate pairs or small numbers of candidates for promotion, rather than considering candidates individually, may result in decisions that are less racially biased.

5. Increase diversity. The more we interact with people who are different from us, the less we rely on stereotypes. Thus, by taking concrete steps to reduce hiring discrimination in your organization, you can achieve a more diverse workforce and consequently promote more egalitarian negotiating behavior. For example, you might anonymize applications to prevent decision makers from discriminating against minorities during the screening process.