We all negotiate: Some of us for a living, others of us just in order to live. Most of us, I suspect, approach a negotiation without much of a coherent view or approach on what distinguishes a successful and effective negotiation, that leaves both parties economically and emotionally satisfied, from a failed one that disserves one’s interests and damages the relationship in the bargain.
But professors at Harvard and at Wharton, among many other places, actually study the dynamics of negotiations and it turns out there are commonalities between better negotiators; you actually can make fairly objective observations about behaviors that will improve your chances of success. In reading the pieces I did in preparation for writing this, the thought occurred to me more than once that "I knew that!" Well, perhaps I did, but I had not articulated it. And if you haven’t articulated something, how well do you actually know it?
Back to negotiations: A key issue is that of trust. Are there ways to work on building trust? And conversely, if trust has been impaired, is it recoverable?
On the first question, we have "Six Ways to Build Trust in Negotiations" from Harvard Business School’s "Working Knowledge." To affirmatively build trust:
- Speak the other party’s language. This is more than knowing the jargon of an industry, although it surely includes that as a baseline minimum. (The article recounts the sorry tale of a technology consulting firm invited to bid on re-working an airline’s ticketing process who didn’t know that in airline-land a "lift" means a paper ticket—and who had to ask what it was. Game over.
But more fundamentally, if you haven’t taken the time to demonstrate familiarity with the other side’s culture, history, and perspective, how committed to the mutual engagement are they going to think you are?
- Manage your own reputation. One can hope that if you and the other party know each other already, that this is taken care of. And if it’s "taken care of" in the sense that your own reputation is in tatters with them, you probably have another priority than worrying about this impending negotiation. The interesting case is where you’re relative strangers: How do you pre-manage your reputation then? Case studies of what you’ve accomplished in similar situations go a long way; so do testimonials from third parties widely seen as objective. The point is not to assume that because you know how good you’ve been in the past, they will too.
- Be prepared to be dependent. Psychologically, it’s awkward for many of us to admit we’re dependent on someone else. Let go of that; dare to let the other party know that you’re relying on them for a reciprocal dialogue by which you can achieve your own goals, as well as furthering theirs. The courage to display a little vulnerability can in and of itself promote trust.
- Consider unilateral concessions. Not on the ultimate issues, of course, but in order to demonstrate that you value the relationship itself, consider it a friendly one, and that you expect it to endure over time. The trick to a "unilateral concession" is that it have asymmetric value: It needs to be relatively inconsequential for you to offer but of real value to the other side. Whether there’s such an opportunity is of course highly "fact specific," as they say, but be on the lookout and seize the chance if it should arise.
While we’re on concessions, something virtually all articles on negotiation agree on is this:
- Label your concessions as such. Won’t the other side obviously know it’s a concession? Objectively, perhaps; but psychologically, parties in a negotiation are often (even unconsciously) ready to ignore, discount, or devalue the other side’s concessions because it relieves them of the social and moral expectation of reciprocity. An "unrequited concession," in turn, can cause the first mover to retreat into resentment and a vow to pursue only hardball tactics going forward. To help ward this off, explain how what you’re giving up is really a meaningful sacrifice.
- Explain your demands. This may be obvious, but be prepared for the likelihood that the other side, particularly if you’re relative strangers, may not assume the best about your motives and intentions. It’s a truism that we tend to regard ourselves positively and others with suspicion—at least if we’re in potential conflitc with them. So, for example, if a literary agent tells an author that the commission on international sales is higher than on domestic sales, the agent better immediately explain that it’s because she has to split the commission with a foreign agent in the first case and that she actually ends up with less for herself. While the author’s economic circumstance is precisely unchanged, at least he understands the agent’s expectation for international sales.
What if trust has been impaired? Is it terminally damaged goods?
According to three professors of operations, information management, and marketing over at Knowledge@Wharton, not necessarily. They constructed a little laboratory money game where subjects were given $6 in each of seven rounds of the game and told that they could keep it all, in which case they simply went to the next round with their $6, or else they could give it all away to an unseen co-player (a stooge of the professors) who would receive triple the $6 ($18) and would be at liberty to decide how much, if any, to return to the first player.
At the outset, nearly everyone passed on the $6 and everyone who did was double-crossed, getting nothing in return. To increase the complexity of things, half the players also got a note from the stooge promising to return $12 next time—upon which they also reneged.
Trust now thoroughly shattered, what happened on the final five rounds was invariant: If they passed on the $6, they got back $9—an effort to establish a (belated) pattern of trustworthy behavior. In addition, some of the stooges passed their players a note containing an apology ("I really screwed up. I shouldn’t have done that."), a promise ("I give you my word. I’ll return $9 every round.") or both.
Fine: So what did the good professors learn?
Essentially, that untrustworthy behavior is very very bad, but that deception is atrocious.
In other words, if you’re going to disappoint or double-cross somebody, don’t lie to them about it on top of things.
Did the apologies do any good? Actually, "it didn’t seem to matter much at all." The professors hastily add that the specific apology they used in the game might have been at fault for this finding, since it fell short of what other researchers have identified as the five key components of an effective apology. Since you asked, they are:
- the statement of apology itself; I’m sorry
- remorse; I feel bad
- an offer of restitution
- self-castigation; I was a jerk, and
- a request for forgiveness.
The promise to do better in future, on the other hand, had some measure of traction in helping speed restoration of trust. The only caution on this score is, of course, not to make promises you can’t keep.
But all in all, won’t your next negotiation be far simpler and more likely of success if you never open the door to your trustworthiness being doubted in the first place?
Indeed, and Adam Smith would agree. Earlier this year, HBS’ Working Knowledge interviewed a professor who had read "The Theory of Moral Sentiments," not just "The Wealth of Nations," and who had this to say:
"Q: What do you think Adam Smith’s advice to business leaders would be concerning corporate ethics given what he writes about trust?
"A: This is a great question. Smith believed that there were certain virtues, such as trust and a concern for fairness, that were vital for the functioning of a market economy. He wrote about trust and reciprocity as critical foundations of the early beginnings of the market, allowing reciprocal gift exchange to emerge, and leading to trade. One might think that the need for trust and trustworthiness diminishes as a market develops, but if anything the opposite is true.
"For example, we trust managers to carry out the interests of shareholders: We can build contracts to align manager incentives with those of shareholders, but we are never able to completely contract on all the things we care about and want to enforce. Implicitly, then, we hold a belief that managers have internalized the values we care about, and trust them to act on those, particularly when they might come in conflict with their own interests.
"There are similarly other professions where individuals are entrusted to serve, like doctors, teachers, auditors, but cannot be monitored fully. We thus rely on these individuals’ professionalism and honor (or “enlightened self interest”) to carry out their occupations.
"Across organizations, in the marketplace, factors like brand reputation and warranties help facilitate transactions without requiring complete trust. Within organizations, the issue of trust and trustworthiness—of employees to their bosses, of managers to each other and to shareholders—becomes even more important, and even more difficult to replace by market forces or better incentives and contracts.
"Thus, Smith’s advice to business leaders would likely be that they should weigh carefully the costs of breaking trust and of risking reputation. The costs of sacrificing ethical standards of conduct are much larger than any individual might imagine, precisely because they decrease trust and can strongly affect organizational and market functioning as a whole."
Further affiant sayeth not.
