Imagine you and a friend are sitting in a restaurant. Someone walks up to you and hands you each $100. Pretty nice, huh? You just went out to dinner and you’re both ahead by $100!
Now imagine that same person walks up to you and your friend and gives your friend $1,000. The person tells your friend, “Here’s the deal: that money is yours only if you two can figure out how to divide the $1,000 in the next 60 seconds. Make your friend an offer. If he accepts, you can keep the money. If you two can’t agree, I take it all back and neither of you gets anything.”
Your friend turns to you and says, “How about I give you $100?”
Remember how happy you were to get $100 just a few paragraphs ago? Do you feel the same way about getting that $100 now? Why or why not? It’s the same $100! How about if he ups it to $150?
If you’re like most people, you will turn down any offer below $200 as not being enough because it’s not a “fair” split of the money. So what is “fair” in these circumstances? You’ve got 60 seconds to decide or else neither of you gets anything.
Studies of fairness have shown that not only will you turn down the offer, but given the opportunity you will seek to punish your friend in the future for his bad behavior. In a situation where you get to make the allocation, you will return the behavior to teach him a lesson. What makes this relevant for us in negotiations is we can find ourselves in situations where, from an economic perspective, the other party should be saying “yes” to our offer because the outcome is “better than nothing.” The other side has moved away from the notion of absolute gain and is instead considering the relative gain: how much is he getting compared to you?
The good news is we seem to have an instinct for this phenomenon because in most studies the opening offer was an even split or close to it. The average first offer was usually 30 percent or more of the pool of money. This highlights the importance of understanding the role that emotion plays in negotiation. The issue is not always “What am I getting out of the deal”; it’s also a question of how that compares to what the other side is getting out of the deal. Our interests in the outcome will have a host of objective measures to meet, but in the end the deal also has to feel “fair.”
Tuesday, November 23, 2010
Monday, November 15, 2010
Why Do You Do That?
A monk was trying to meditate in the temple with several students. He was distracted by the squawk of a bird in the room. He asked one of the students to put a cloth over the cage to quiet the bird.
The next day, the student put the cloth over the cage before meditation without being asked, and continued to do so for many months. New students joined the class and, over the years, the original students moved on, the monk passed away and so did the bird. It was 10 years later and a new monk came to the temple to meditate. A student got up and put a cloth over the empty bird cage in the corner. The monk called him over and asked what he was doing. The student said, “We always lay a cloth over the cage before we meditate.” The monk asked why. The student said, “I have no idea.”
Many of us travel through life without ever stopping to ask, “Why is that?” Some things are the way they are because nobody has thought to change the practice or behavior. We need to always be mindful of this in negotiations: just because that’s how it’s been done before, it doesn’t mean it’s the best way to do it or that it even makes sense.
“Process”, or how we will get to “done”, is a critical and often ignored part of a negotiation. We engage with the other party who sets the ground rules: “We will meet for an hour on Monday and give you our positions and ask you to respond on Tuesday. On Wednesday we will tell you if your response is acceptable or not and then you can revise your response by Thursday.” If you were to ask “Where did this process come from?” chances are the response would be: “That’s how we always do it!” Because we don’t want to come across as difficult or challenging, we go along with the plan though it seems woefully inefficient. Next time, try asking if there is a better way.
“Larry, I’d like the process to be structured as well, but if it’s OK with you, could we discuss some ideas for potential changes? My concern is if we only have an hour to hear your issues we won’t have enough information to give you a good response Tuesday.”
“OK, Alice, what would you suggest? I don’t want this to drag on forever.”
“Neither do we. Could we see what we accomplish in the first hour and then determine how much time we need for us to ask questions and clarify issues? I want to make sure we understand and are responding to your interests. Otherwise, our response may not address the problems you are trying to solve.”
“That sounds reasonable. I will schedule two hours for Monday to make sure we have enough time.”
What Alice has done is reserved extra time to clarify Larry’s points and, if she prepares well, she will take a first step toward building an environment of collaboration among the two teams. She wants that first meeting to end with a shared sense that the teams are trying to work together to produce the best outcome possible for both parties. Then the teams can modify the process accordingly.
A poorly laid out process will impact the substance of our negotiations. It will also hurt our relationship rather than help it as tensions arise because progress is slow. Design a process together that 1. focuses on driving out the parties’ interests and creating options to solve issues and 2. gets the parties working together as “joint problem solvers” to enhance the relationship. Don’t agree to keep throwing sheets over empty cages!
The next day, the student put the cloth over the cage before meditation without being asked, and continued to do so for many months. New students joined the class and, over the years, the original students moved on, the monk passed away and so did the bird. It was 10 years later and a new monk came to the temple to meditate. A student got up and put a cloth over the empty bird cage in the corner. The monk called him over and asked what he was doing. The student said, “We always lay a cloth over the cage before we meditate.” The monk asked why. The student said, “I have no idea.”
Many of us travel through life without ever stopping to ask, “Why is that?” Some things are the way they are because nobody has thought to change the practice or behavior. We need to always be mindful of this in negotiations: just because that’s how it’s been done before, it doesn’t mean it’s the best way to do it or that it even makes sense.
“Process”, or how we will get to “done”, is a critical and often ignored part of a negotiation. We engage with the other party who sets the ground rules: “We will meet for an hour on Monday and give you our positions and ask you to respond on Tuesday. On Wednesday we will tell you if your response is acceptable or not and then you can revise your response by Thursday.” If you were to ask “Where did this process come from?” chances are the response would be: “That’s how we always do it!” Because we don’t want to come across as difficult or challenging, we go along with the plan though it seems woefully inefficient. Next time, try asking if there is a better way.
“Larry, I’d like the process to be structured as well, but if it’s OK with you, could we discuss some ideas for potential changes? My concern is if we only have an hour to hear your issues we won’t have enough information to give you a good response Tuesday.”
“OK, Alice, what would you suggest? I don’t want this to drag on forever.”
“Neither do we. Could we see what we accomplish in the first hour and then determine how much time we need for us to ask questions and clarify issues? I want to make sure we understand and are responding to your interests. Otherwise, our response may not address the problems you are trying to solve.”
“That sounds reasonable. I will schedule two hours for Monday to make sure we have enough time.”
What Alice has done is reserved extra time to clarify Larry’s points and, if she prepares well, she will take a first step toward building an environment of collaboration among the two teams. She wants that first meeting to end with a shared sense that the teams are trying to work together to produce the best outcome possible for both parties. Then the teams can modify the process accordingly.
A poorly laid out process will impact the substance of our negotiations. It will also hurt our relationship rather than help it as tensions arise because progress is slow. Design a process together that 1. focuses on driving out the parties’ interests and creating options to solve issues and 2. gets the parties working together as “joint problem solvers” to enhance the relationship. Don’t agree to keep throwing sheets over empty cages!
Wednesday, November 10, 2010
We Judge Books By Their Covers
Our language is full of conflicting adages: “He who hesitates is lost” as opposed to “Look before you leap”. “A penny saved is a penny earned” versus “Money is the root of all evil”. Negotiators are familiar with the notion that “You can’t judge a book by its cover,” but at the same time worry “You only get one chance to make a first impression.”
Our concerns are well placed: first impressions do matter, and a bad first impression is difficult to undo no matter how different we really are “inside”.
Disciplined negotiators know that how the other side perceives us will have a material impact on our ability to generate trust in our relationship. If we cannot build trust, we will not establish a collaborative negotiation environment with the other party. This will result in a more positional engagement, producing sub-optimal results (assuming we reach agreement at all). Simply put, a good first impression is a key step in our journey toward an optimal result from our negotiations.
Research shows that our brains are wired to make snap judgments of people, partially because of our “fight or flight” instinct. When we meet another person for the first time, our innate response is to “size them up” using what social psychologist Amy Cuddy refers to as “spontaneous trait inferences.” Many factors go into the rapid analysis our brain performs at the moment of introduction to a new person. Cuddy highlights two critical variables that will determine whether you feel good or bad about the other party: warmth and competence. (For a thorough discussion of the topic see Craig A. Lampert’s article about Cuddy’s research in the December issue of Harvard Magazine at http://harvardmagazine.com/2010/11.)
Here are some tips on how to improve first impressions:
• The first assessment is about warmth. The other party instinctively will determine whether we are friend or foe. Many people assume incorrectly that in a negotiation the goal is to establish “power” from the start. It is not. Our goal is to put the other side at ease. A firm handshake, eye contact, a gentle tone and a smile are all vital to establishing an initial sense that we are not to be feared. Ultimately, we want to speak of ourselves as “joint problem solvers” to drive a spirit of cooperation. People don’t want to open up to and solve problems with those who make them feel defensive.
• Next is the issue of competence. Are we capable of accomplishing whatever it is the parties need to do? Competence and warmth are not mutually exclusive: the fact that we seem “nice” does not mean we won’t be seen as competent. In fact, Cuddy determined that when someone is perceived as both warm and competent, it evokes admiration from the other party. We know what we’re doing and we’re nice to boot! She found that people who are seen as competent and cold often become targets; other people want to tear them down because they seem skilled, but are not likable.
• To establish competence, we must exude confidence. Obviously this requires being prepared on the subject matter for our meetings with the other party. It also means physical confidence: sitting up straight, hands in front and legs uncrossed. Cuddy’s research has found that a confident posture will actually increase our testosterone balance, making us feel more confident. When our arms are folded and legs crossed, we are “coiling up” like an animal that feels like it is prey and our testosterone level and confidence decreases.
While it is noble for us to aspire to not judge a book by its cover, be aware that despite your intentions, others will judge you by your cover. To be Deal Whisperers we must learn to handle ourselves in a way that we will be judged most favorably: as warm and competent.
Our concerns are well placed: first impressions do matter, and a bad first impression is difficult to undo no matter how different we really are “inside”.
Disciplined negotiators know that how the other side perceives us will have a material impact on our ability to generate trust in our relationship. If we cannot build trust, we will not establish a collaborative negotiation environment with the other party. This will result in a more positional engagement, producing sub-optimal results (assuming we reach agreement at all). Simply put, a good first impression is a key step in our journey toward an optimal result from our negotiations.
Research shows that our brains are wired to make snap judgments of people, partially because of our “fight or flight” instinct. When we meet another person for the first time, our innate response is to “size them up” using what social psychologist Amy Cuddy refers to as “spontaneous trait inferences.” Many factors go into the rapid analysis our brain performs at the moment of introduction to a new person. Cuddy highlights two critical variables that will determine whether you feel good or bad about the other party: warmth and competence. (For a thorough discussion of the topic see Craig A. Lampert’s article about Cuddy’s research in the December issue of Harvard Magazine at http://harvardmagazine.com/2010/11.)
Here are some tips on how to improve first impressions:
• The first assessment is about warmth. The other party instinctively will determine whether we are friend or foe. Many people assume incorrectly that in a negotiation the goal is to establish “power” from the start. It is not. Our goal is to put the other side at ease. A firm handshake, eye contact, a gentle tone and a smile are all vital to establishing an initial sense that we are not to be feared. Ultimately, we want to speak of ourselves as “joint problem solvers” to drive a spirit of cooperation. People don’t want to open up to and solve problems with those who make them feel defensive.
• Next is the issue of competence. Are we capable of accomplishing whatever it is the parties need to do? Competence and warmth are not mutually exclusive: the fact that we seem “nice” does not mean we won’t be seen as competent. In fact, Cuddy determined that when someone is perceived as both warm and competent, it evokes admiration from the other party. We know what we’re doing and we’re nice to boot! She found that people who are seen as competent and cold often become targets; other people want to tear them down because they seem skilled, but are not likable.
• To establish competence, we must exude confidence. Obviously this requires being prepared on the subject matter for our meetings with the other party. It also means physical confidence: sitting up straight, hands in front and legs uncrossed. Cuddy’s research has found that a confident posture will actually increase our testosterone balance, making us feel more confident. When our arms are folded and legs crossed, we are “coiling up” like an animal that feels like it is prey and our testosterone level and confidence decreases.
While it is noble for us to aspire to not judge a book by its cover, be aware that despite your intentions, others will judge you by your cover. To be Deal Whisperers we must learn to handle ourselves in a way that we will be judged most favorably: as warm and competent.
Monday, November 1, 2010
Admit It, You're Wrong!
Nobody likes being wrong. In fact, some people have so much trouble admitting they are wrong that they will perform acrobatic feats of rationalization to avoid accepting blame. Think for a moment about arguments you have had with your significant other. How often do the excuses start with, “Well, if you hadn’t…” and continue with a tenuous chain of cause and effect that ends with “…so it’s not my fault!”
Disciplined negotiators not only admit when they are wrong, they use mistakes as opportunities to build trust. Because people rarely admit their errors, when we deal with people who do, it is refreshing and puts them in a different light than run of the mill “blame dodgers.” Over a period of time, having a reputation for admitting mistakes can pay dividends when a problem arises that really isn’t your fault. The other party has every reason to believe you because you’ve shown your practice is to admit when it is your fault. They trust you.
A greater challenge is what to do when the other party refuses to admit that they have made a mistake. Trying to resolve a dispute, for example, becomes difficult if the other side won't acknowledge their contributions to the problem. (In one memorable exchange, Party A admitted they had made mistakes, but said it was still Party B’s fault because Party B failed to stop Party A from making mistakes!)
The reason why people don’t admit mistakes is very simple: they fear the consequences of being held accountable. Like a teenager claiming the dent in the car was “not my fault,” they don’t want to get “in trouble”. Those consequences might be institutional (they expose their business to liability) or personal (they or their colleagues will hurt their careers or reputations). In some cases, the fear may be purely egotistical: some people like to believe they are always right.
If you can eliminate their fear of the consequences you will start to change the other party’s behavior. Two ways of eliminating the fear are:
· Build affiliation by acknowledging your own mistakes or by sharing examples where other business partners made mistakes and how things worked out. Create an environment where everyone appreciates the issues are complex, fast-moving and mistakes will be made. Just don’t make the same mistakes twice! “Hey, we’re trying to launch a whole new business process here under tight timelines. We’re all doing our best but we know something will get messed up. The key is to learn from it, fix it, and move on.”
· When discussing what went wrong, also discuss the outcomes. If the other party can see over the horizon, they may be more willing to concede what happened. Demonstrate your intent is to help remedy the problem and to make them as successful as you in achieving the goal. “We know you are short of material for now. I can get some from another supplier and keep working on the product until you can get the rest of what we need from your factory. The cost for the delay will be minimal. What else can we do to help you?”
These same methods apply even to teenagers! Before asking “what happened”, let them know the consequences. Tell them the truth will produce one outcome, and not telling the truth produces a harsher outcome. Model the behavior you seek and slowly you will see change.
Disciplined negotiators not only admit when they are wrong, they use mistakes as opportunities to build trust. Because people rarely admit their errors, when we deal with people who do, it is refreshing and puts them in a different light than run of the mill “blame dodgers.” Over a period of time, having a reputation for admitting mistakes can pay dividends when a problem arises that really isn’t your fault. The other party has every reason to believe you because you’ve shown your practice is to admit when it is your fault. They trust you.
A greater challenge is what to do when the other party refuses to admit that they have made a mistake. Trying to resolve a dispute, for example, becomes difficult if the other side won't acknowledge their contributions to the problem. (In one memorable exchange, Party A admitted they had made mistakes, but said it was still Party B’s fault because Party B failed to stop Party A from making mistakes!)
The reason why people don’t admit mistakes is very simple: they fear the consequences of being held accountable. Like a teenager claiming the dent in the car was “not my fault,” they don’t want to get “in trouble”. Those consequences might be institutional (they expose their business to liability) or personal (they or their colleagues will hurt their careers or reputations). In some cases, the fear may be purely egotistical: some people like to believe they are always right.
If you can eliminate their fear of the consequences you will start to change the other party’s behavior. Two ways of eliminating the fear are:
· Build affiliation by acknowledging your own mistakes or by sharing examples where other business partners made mistakes and how things worked out. Create an environment where everyone appreciates the issues are complex, fast-moving and mistakes will be made. Just don’t make the same mistakes twice! “Hey, we’re trying to launch a whole new business process here under tight timelines. We’re all doing our best but we know something will get messed up. The key is to learn from it, fix it, and move on.”
· When discussing what went wrong, also discuss the outcomes. If the other party can see over the horizon, they may be more willing to concede what happened. Demonstrate your intent is to help remedy the problem and to make them as successful as you in achieving the goal. “We know you are short of material for now. I can get some from another supplier and keep working on the product until you can get the rest of what we need from your factory. The cost for the delay will be minimal. What else can we do to help you?”
These same methods apply even to teenagers! Before asking “what happened”, let them know the consequences. Tell them the truth will produce one outcome, and not telling the truth produces a harsher outcome. Model the behavior you seek and slowly you will see change.
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