OBS 220: The Mind and Heart of the Negotiator

Chapter 1
Negotiation is an interpersonal decision-making process necessary whenever we cannot achieve our
objectives single-handedly. For this reason, negotiation is your key communication and influence tool in
most relationships.

The Mind and Heart

We focus on the mind of the negotiator as it involves the development of rational and thoughtful
strategies for negotiation, designed to maximize economic value. We also focus on the heart of the
negotiator because ultimately, we care about relationships and trust.

Relationships vs Economics

Two things are at stake: economic value (i.e., money and scarce resources) and people (relationships
and trust). Many people believe they need to choose between getting what they want or being liked.
These negotiators often believe that by “taking one for the team,” they can later maximize their
economic gains. This strategy is not advisable because we negotiate in long-term relationships with
people who have short-term memories.

Satisfying vs Optimizing

Satisficing refers to doing just enough to reach one’s minimum goals. When negotiators are satisfied,
they take shortcuts and do not maximize their potential gains. Optimize, they capture all the potential
gain in a situation. In negotiation it is important to optimize one’s strategies by setting high aspirations
and attempting to achieve as much as possible (long-term goals).

Short- vs Long-Term Relationships

The intuition is that if a person believed the negotiation was a single-shot situation, they might behave
differently—perhaps more aggressively—than if they anticipated interacting with the counterparty in
the future. Even if a negotiator does not actually meet a given counterparty again, by virtue of social
media, a detailed account of their interaction would surely be visible for anyone to see. the details of
their negotiation communication and behavior will be accessible for anyone who might be interested,
and consequently, to act as though all negotiations have long-term implications.

Intra- vs Inter-Organizational Negotiation

Internal negotiations might go more smoothly and collaboratively than external negotiations. Envy and
internal competition may in fact loom larger when people negotiate internally versus externally.

Low- vs High-Stakes Negotiation

• Managers and executives in my classroom have commented that they are not concerned that
they failed to reach a win–win outcome because the negotiation was “low stakes.” Low stake -
not committed to win-win. High-stakes - committed to win-win.
Win–win negotiations are situations in which both negotiators optimize the potential joint gains. We will
refer to win–win agreements as integrative agreements because the outcome is one that creatively
combines parties’ interests in a way that maximizes the joint economic value. Variable-sum as opposed
to fixed-sum situations.

Win–lose negotiation refers to situations in which one party prevails at the other party’s expense.
Example, one party has threatened the other party.

Lose–lose negotiations are situations in which both parties have made sacrifices that are ultimately
unwise or unnecessary, resulting in an outcome that both parties find less than satisfying.

Negotiation as a Core Management Competency

There are several reasons for this, including: the knowledge economy, specialized expertise, information
technology, and globalization.

1) Knowledge Economy
Because the nature of knowledge work changes rapidly, managers of all ages are continuously
negotiating their professional identity, acquiring new skills, and moving into new jobs, industries, and
markets. What is changing is the stigma associated with job-hopping. The job-hopper is not simply in
pursuit of higher wages; they are willing to take pay cuts for the right job in a positive work culture and
career growth.

2) Specialized Expertise
People must continually create possibilities, integrate their interests with others, and recognize the
inevitability of competition both within and between companies. Managers must be in a near-constant
mode of negotiating opportunities. The increasing interdependence of people within organizations, both
laterally and hierarchically, implies that people need to know how to integrate their interests and work
across business units and functional areas.

3) Information Technology
With technology that makes it possible to communicate with people anywhere in the world, managers
are expected to negotiate at a moment’s notice. Because customers expect companies to be accessible
to them 24/7, businesses have reimagined how to respond quickly.

4) Globalization
Managers need to develop negotiation skills that can be successfully employed with people of different
nationalities, backgrounds, and personalities.

Negotiation Traps
In our research and teaching, we have observed and documented four major shortcomings in
negotiation:

• Leaving money on the table (also known as “lose–lose” negotiation) occurs when negotiators fail to
recognize and capitalize on their win–win potential.
• Settling for too little (also known as “the winner’s curse”) occurs when negotiators make a too-large
concession, resulting in a too-small share of the bargaining pie.
• Walking away from the table occurs when negotiators reject terms offered by the other party that are
demonstrably better than any other option available to them. Sometimes this shortcoming is traceable
to hubris or pride; other times it results from gross miscalculation.
• Settling for terms that are worse than your best alternative (also known as the “agreement bias”)
occurs when negotiators feel obligated to reach agreement even when the settlement terms are not as
good as their other alternatives.

Becoming an Effective Negotiator

Successful negotiation strategies involve preparation and then, post-negotiation behaviors. A key skill is
to initiate negotiations and prepare effectively. During negotiation, the negotiator executes their planned
strategy and should be ready to evaluate the quality of negotiated settlements. Four key objectives in
assessing the quality of contracts:

• how to maximize the likelihood of reaching a good agreement.

• how to reach an agreement that fulfills the intended purpose.
• how to reach an agreement that will last.
• how to reach an agreement that will lead to subsequent negotiations.

There are 3 elements in improving your negotiation skills:

Feedback: Experience, in the absence of feedback, is largely ineffective in improving negotiation skills.
People who are provided with feedback immediately following their negotiation are more likely to
adjust their strategies and perform better in subsequent negotiations.

Strategy: Analysis of success/failure of negotiation.

Focused Practice: A key step in learning to be an effective negotiator is behavioral practice. It is one
thing to passively learn about negotiation skills, it is quite another to put them into practice via
simulations.
Debunking Negotiation Myths (potential question)

Myth 1: Negotiations are fixed sum.

Most negotiations are variable-sum, meaning that if parties work together, they can create more joint
value than if they are purely combative. Our approach to negotiation is based on Walton and McKersie’s
view that negotiation is a mixed-motive enterprise, such that parties have incentives to cooperate as
well as compete.

Myth 2: You need to be either tough or soft.

Effective negotiators follow an “enlightened” view of negotiation and correctly recognize that to achieve
their own outcomes they must work effectively with the other party but must also leverage their own
power and strengths.

Myth 3: Good negotiators are born.

Indeed, people who view negotiation as a challenge are more successful in reaching high quality deals
than people who view negotiation as threatening. Moreover, people who believe that negotiation ability
can be improved with experience and practice are more likely to discover win–win agreements than
people who believe that negotiation skills are not teachable.

Myth 4: Good negotiators rely on intuition.

Effective negotiation involves deliberate thought and preparation and is quite systematic. This is all to
say that excellent negotiators are not guided by intuition; rather, they are deliberate planners.

Just a reminder: My notes are a basic reference of the textbook. Refer to the textbook
for more information.