Author: Lisa Witzler

Adapted from “You Need to Know What You Want,” first published in the Negotiation newsletter.

Do you really know what you want out of life? Most of us don’t, according to Timothy D. Wilson and Daniel T. Gilbert, psychology professors at the University of Virginia and Harvard University, respectively. The impact bias describes the common, systematic failure to predict what will make us truly happy. Wilson and Gilbert note that people dramatically overestimate how positive and negative events—from winning the lottery to suffering an amputation—will change their lives.

Vanderbilt University Law School professor Chris Guthrie and Cornell University business professor David Sally have offered a fascinating application of this affective forecasting research to negotiation. The models on which negotiation research are founded, Guthrie and Sally point out, are based on the assumption that negotiators know what they want; yet, most negotiators enter into talks without a realistic awareness of what outcome will make them happy.

Consider the case of a plaintiff who is eager to go to trial, anticipating a large financial award and the joy of beating the other side. Meanwhile, her lawyer may well understand that obtaining a smaller amount of money through a settlement is likely to bring his client greater value than the uncertain payoff of a trial. The lawyer also knows from experience that the satisfaction of winning will be short-lived.

Guthrie and Sally argue that, rather than simply following the client’s preferred path, the lawyer should steer her toward maximizing her long-term happiness. Because most people tend to be risk averse when it comes to gains, for instance, the lawyer might frame the out-of-court settlement as a guaranteed win. The lawyer might also encourage his client to take a cooling-off period to think about an offer. Why? Because the “cognitive load” associated with the heat of the moment is known to reduce the accuracy of affective forecasts.

Adapted from “Deadline Pressure: Use it to Your Advantage,” by Don A. Moore (professor, Carnegie Mellon University), first published in the Negotiation newsletter.

In the summer of 1988, National Basketball Association (NBA) team owners and players were at loggerheads over their new contract. At midnight on June 30, the owners declared a lockout, halting preparations for the start of the 1998–99 NBA season. The players and owners negotiated for six long months, during which time the two sides collectively lost hundreds of millions of dollars.

In the end, it was a deadline that resolved the conflict. The team owners declared that if they didn’t reach an agreement with the players by January 7, 1999, they would cancel the rest of the season. In effect, the owners placed a final, arbitrary deadline on their participation in the negotiations; the chosen date had little significance to either side. Through public statements, the owners committed themselves to declaring an impasse if the deadline came and went. In the early-morning hours of January 6, the two sides agreed to contract terms that dramatically favored the owners.

We’re all familiar with stories of tough opponents who bargain for months without making progress, only to reach resolution in the final moments before the passage of a critical deadline. Without a deadline, negotiators are tempted to use stalling tactics, hoping to pressure the other side into giving in.

Despite the proven effectiveness of deadlines, they remain one of the most misunderstood negotiation strategies. Many negotiators hesitate to place a deadline on their talks. In his research, when professor Don Moore of Carnegie Mellon University asked people to predict the effect of deadlines on negotiations, even experienced negotiators predicted that the presence of a shared deadline would hurt them by forcing them to concede more quickly than they would like, thereby helping their opponents.

While there is some truth to these assumptions, it’s also true that deadlines increase pressure on the other party to reach an agreement. Negotiators who recognize that deadlines affect everyone equally can use them to defuse costly stalling tactics. For example, car salespeople sometimes try to draw out price negotiations, hoping the amount of time you’ve invested will increase your commitment to making the deal. To defuse this strategy, try beginning your negotiation for a new car by informing the salesperson that you have only an hour to make a possible deal.

Because deadlines put pressure on everyone, they can get talks moving again. Don’t be afraid to set deadlines and commit to them. Furthermore, when negotiators tell their opponents about an existing final deadline, they get better deals. Why? First, because both sides are more likely to work toward an agreement before the deadline passes, you reduce your risk of walking away with nothing. Second, when an opponent knows about your deadline, he’ll make concessions much more quickly. The NBA owners’ January 7 deadline would have been useless if they had kept it secret; the players’ union would have kept negotiating past the deadline.

In an age of terror, our national leaders face this sort of question every day. Should we negotiate with the Taliban? Iran? North Korea? What about terrorist groups holding hostages?”

In his new book, Bargaining with the Devil: When to Negotiate, When to Fight, Robert Mnookin, Chair of the Program on Negotiation at Harvard Law School, suggests a framework for analyzing the most difficult kinds of negotiation challenges so that you can avoid traps and make wise decisions.

Broadening the concept of “devils” beyond the political realm, Mnookin notes that “in private disputes, you may face devils of your own. A business partner has betrayed you and now wants to negotiate a better deal. A marriage is ending and a divorcing spouse is making extortionist demands. A competitor has stolen your intellectual property. You are furious. You may not see your adversary as evil, but your gut tells you to fight it out in court. To negotiate with this person would give him something he wants. It would reward him for his bad behavior. You want your rights vindicated, and the thought of negotiating with your adversary seems wrong.”

“This book is about these kinds of conflicts, which pose some of the most challenging questions in negotiation. A disputant must decide: Should I bargain with the Devil, or resist? By “bargain” I mean attempt to make a deal – try to resolve the conflict through negotiation – rather than fighting it out. By “Devil,” I mean an enemy who has intentionally harmed you in the past or appears willing to harm you in the future. Someone you don’t trust. An adversary whose behavior you may even see as evil.”

Join the Program on Negotiation to celebrate the publication of Robert Mnookin’s new book and to join in a discussion of the issues raised.

Event Date: Thursday February 4, 2010
Time: 5:30PM Reception, 6:00PM Presentation and Discussion
Location: Ropes Gray Room, 2nd Floor Pound Hall, Harvard Law School Campus, 1563 Massachusetts Ave., Cambridge, MA 02138

Click here for more information about the event.

Negotiation experts played a variety of roles in working through possible scenarios for negotiating with Iran over the issue of nuclear capability. As shown on the PBS television program, The Charlie Rose Show, the experts posed questions and “gamed out” different options, imagining possible responses of the other parties. PON affiliate Ehud Eiran participated in these discussions.

To see the full interview, click here.

Adapted from “Your Good Mood May Work Against You,” first published in the Negotiation newsletter.

            Just before a meeting with her boss, Cindy peeks into his secretary’s office and whispers: “How’s his mood today?” When the secretary gives a thumb’s up, Cindy decides the time is right to ask for a big raise.

Intuitively, most of us wait until others are in a good mood before presenting controversial requests. Moreover, we try to keep this strategic thinking under wraps.

Researchers Eduardo B. Andrade and Teck Ho of the University of California at Berkeley bring new evidence to bear on this conventional wisdom. The researchers divided their study participants into pairs, randomly assigned them to roles, and asked the “proposers” to divide a pot of money between themselves and the “receivers.” Only two divisions were allowed: a “fair” 50-50 division or an “unfair” division—75% for the proposer and 25% for the receiver. If the receiver said yes, the subjects received the proposed split. If the receiver said no, neither subject received anything.

In a twist on this prototypical “ultimatum game,” Andrade and Ho manipulated the receivers’ moods. They tried to put half in a happy mood, in part by showing them a funny sitcom, and the other half in an angry mood, in part by showing them a disturbing movie clip.

The proposers were told which clip their receivers had watched. Some of these proposers knew that their receivers were unaware that they had this knowledge; these proposers made significantly more unfair offers to receivers in the happy condition than to receivers in the angry condition. Other proposers knew that their receivers were aware that they had this knowledge about the clips; these proposers did not make unfair offers significantly more often.

In plain English: Cindy is likely to feel comfortable negotiating aggressively with her boss—as long as she thinks he isn’t aware that she knows about his good mood. But suppose that the secretary announces, “I told her that you’re feeling great today!” when she ushers Cindy into the office. Now Cindy is likely to be inhibited from trying to take advantage of the boss’s expansive mood.

This research provides important defensive advice: discuss your positive feelings openly at the outset of talks.

Adapted from “Who’s Watching? How Onlookers Affect Team Talks,” by Karen A. Jehn (professor, Leiden University) and Lindred L. Greer (professor, University of Amsterdam), first published in the Negotiation newsletter.

Imagine that you and a colleague get into an argument about the layout of a final report in front of a coworker you both like. Now suppose the same argument occurs in front of someone your colleague likes but you do not or vice versa—in front of an ally who is your colleague’s foe. As it turns out, the presence of various team members during a negotiation with another teammate may affect your negotiating ability.

Information exchange. Negotiators in a team setting who distrust each other tend to withhold information even when information sharing is critical to the task at hand, Karen A. Jehn of Leiden University and Lindred L. Greer of the University of Amsterdam found in their recent research with Heather Caruso of Harvard University. This suggests that you’ll be more likely to share information with your negotiation partner when you like other team members who are present. By contrast, if you dislike or distrust certain onlookers, you may withhold more. Similarly, your negotiation partner may be reluctant to share information in front of certain team members.

Balanced relationships. In his classic book The Psychology of Interpersonal Relations (Wiley, 1958), Fritz Heider observes that we tend to seek balance in our relationships. This desire for balance may lead you to turn against a friend’s enemy or, conversely, to befriend an ally’s friends. If both you and your negotiation counterpart dislike an onlooker to your dispute, you may actually grow to like each other more and collaborate more with each other. The presence of a “common enemy” causes negotiators to bond against the outsider.

When one negotiator strongly dislikes an onlooker whom the other negotiator likes, the two negotiators may begin to behave competitively with each other. Suppose that your closest team ally sees you negotiating with someone he doesn’t like. To maintain relations with your ally, you’re likely to find fault with your counterpart—a form of transference that will jeopardize your outcome.

In negotiations with colleagues, it’s critical that you strive to reduce the impact of workgroup alliances. Here’s how:

• Acknowledge negative feelings. We all know how difficult it can be to confront animosity during a negotiation at work. If you’re negotiating in front of someone you dislike or with whom you are uncomfortable, first acknowledge these feelings to yourself.

• Deal with clashes privately. Try to remove personal emotions from the task at hand by dealing with them privately. This should reduce the degree to which your allies’ expectations influence your negotiating behavior. Similarly, communicate concern for the relationship with your counterpart while at the same time making sure the negotiation remains as task oriented as possible. By doing so, you may be able to prevent personality clashes from influencing your talks with other coworkers.

• Share information. During a negotiation, strive to stay focused on hammering out the best agreement possible by sharing relevant information. Intentionally hiding information to exact revenge on a colleague who has burned you in the past is likely to backfire in the form of a deal that overlooks significant sources of value. Concentrate on the trust you’ve developed in the past, and guard against “catching” contagious negative feelings from observers.

Adapted from “Negotiate Conditions—and Bring Value to the Deal,” by Guhan Subramanian (professor, Harvard Business School and Harvard Law School), first published in the Negotiation newsletter.

A married couple was debating whether their four-year-old daughter should attend public or private elementary school. It was a difficult issue, and Mike had a tendency to walk out when the conversation got heated. Frustrated, Lisa imposed a condition on the negotiation itself: she would discuss the issue only if Mike agreed not to flee. Mike readily consented to this reasonable request. When the discussion inevitably became tense again, he remembered his promise and stayed at the table. Thanks to the condition that Lisa had added to the negotiation, they reached a deal: public school at the outset but revisiting the issue each year as needed.

Expert negotiators are familiar with the benefits (and limits) of contingent contracts—deal clauses that allow negotiators to avoid impasse by “betting” on their different predictions. Imagine, for example, that a buyer and a seller are negotiating over pricing for delivery services, which will depend heavily on the future price of gas. Believing that gas prices will increase, the seller demands a high price for the service contract. The buyer, who believes gas prices will fall, wants to pay a low price today. If both sides genuinely believe their forecasts, they can set a low price, but with a contingency: the buyer must make added payments if the price of gas rises.

A condition to a deal is a related though far less common deal-structuring technique. Like a contingency, a condition is an “if” statement (“I’ll discuss our daughter’s schooling only if you promise to stay at the table”). But whereas a contingency depends on unknown future events, such as the price of gas, a condition is entirely within the control of the parties involved. In addition, conditions are resolved during talks—and no later than the closing of the deal. Specifically, proposing deal conditions can help you not only avoid impasse but also create and claim value.

Lisa’s condition established a ground rule for her negotiation with Mike. Such “process” conditions can be as useful in business deals as in personal ones. Recently, a couple was interested in buying a vacation house on Martha’s Vineyard, an island off the coast of Massachusetts. They found their ideal retreat and submitted a bid, only to learn that the seller had just received another offer.

The seller suggested an auction between the two bidders. The couple agreed, but only under the following conditions: (1) a single-round, sealed-bid auction, with the seller bound in advance to accept the higher offer; and (2) offers had to include a specific dollar amount (rather than, say, “One dollar more than the higher offer”).

The seller could either reject the couple’s conditions and be left with only one bidder or accept the ultimatum and achieve a one-round auction. The seller accepted the conditions, and the couple won the property at what they perceived to be a reasonable price, thanks to conditions that avoided an all-out bidding war.

Your entry into a negotiation often carries its own value. Lisa, naturally, needed Mike at the table for them to resolve the issue of their daughter’s schooling. Similarly, the couple’s bid on the vacation home was valuable to the seller seeking an auction. When your entry has such value, don’t give it away. Instead, propose negotiating conditions that extract process terms to your advantage.

Join us for a discussion and media presentation of the role oil plays in global conflict.

Peter Maass, New York Times Magazine writer and author of Crude World: The Violent Twilight of Oil, will discuss the power of oil to fan the flames of existing problems and harm countries that possess large quantities of it. His work has taken him to Iraq, Saudi Arabia, Russia, Nigeria, Venezuela, and Kuwait.

Renowned photographer Ed Kashi will share his photographs and multimedia work on the Niger Delta, focusing on issues of oil, development, environmental and economic destruction, sustainability, and our own unavoidable connections to these dynamics.

Wednesday, February 10, 2010, 7 pm.
Pound Hall 102, Harvard Law School

This event is co-sponsored by:
The Program on Negotiation at Harvard Law School
The Nieman Foundation for Journalism
The Shorenstein Center on the Press, Politics, and Public Policy

Refreshments will be served.

Adapted from “Resolve Employee Conflicts with Mediation Techniques,” first published in the Negotiation newsletter.

If you manage people, disputes will show up at your door. The marketing VP protests that the budget cap you and your new finance VP proposed is hindering a research initiative you supported. Two young sales representatives are embroiled in a turf war. Your administrative assistant is upset because the HR director won’t approve the extra week of paid maternity leave you promised her.

In recent years, managers have begun to adopt the proven skills of professional mediators and arbitrators to resolve workplace conflict. In his book Leading Leaders: How to Manage Smart, Talented, Rich, and Powerful People (Amacom, 2006), Tufts University professor Jeswald Salacuse shows how alternative dispute-resolution techniques can defuse tensions and get everyone back to work.

Rather than imposing a decision, a trained mediator tries to help disputants reach their own voluntary solution to the conflict. As a leader, your role can be more complicated. Unlike an actual mediator, you’ll have to live with the outcome of the dispute, and you may have strong opinions about the best result for you, the disputants, and your organization.

For these reasons, leaders need to adapt mediation skills to their purposes. As long as the disputants respect your authority, you should feel empowered to try to change the behavior of one or both sides to serve the organization’s best interests, writes Salacuse. He has identified six bases of social power that will give you the leverage you need.

1. Rewards. As a leader, you have access to resources you can use to reward disputants for changing their behavior. Suppose you have been so impressed by your marketing VP’s achievements that you’re committed to funding the research initiative despite the budget cap that your finance VP wants to enforce. As CEO, you may be able to tap special funds for the project without requiring an exception to the rule. Anticipate, however, that some in your organization may view such special arrangements and rewards as a sign of weakness or as a bad precedent.

2. Coercion. Leaders can punish as well as reward, notes Salacuse. If you are tired of your sales reps’ constant bickering over who poached whose client, you could threaten to take away key accounts from both if they can’t work out a solution. But be careful not to be too heavy-handed with coercion tactics, lest you drive the conflict deeper and closer to home.

3. Expertise. Often, subordinates bring their disputes to their bosses because they expect them to apply specialized expertise to a problem. Your managerial smarts should convince your finance VP to accept your support of the marketing VP’s new initiative. Lawyers, doctors, and other professionals bring unique knowledge and skills to the conflicts in their offices. Salacuse warns, however, that disputants may be dismissive of your recommendations if they perceive your expertise to be no greater than theirs.

4. Legitimacy. A leader’s legitimacy varies by organization and by the nature of the dispute. In a top-down organization, employees will be more likely to accept the guidance of an authority figure than employees of a less-hierarchical firm will be. If your HR director is used to having a great deal of autonomy, he may fight back if you lobby for your assistant to receive an extra week’s maternity leave.

5. Relationships. The degree to which you can influence a disputant also depends on the nature and strength of your relationship with that person. Suppose you decide that you erred in offering your assistant a longer maternity leave than other employees. You should have a better chance of persuading her to accept this view if she has worked closely with you for 10 years than if she only joined the organization a year ago. The desire to preserve the relationship can be sufficient motivation for a disputant to follow your advice.

6. Coalitions and networks. Sometimes outside help is required to effectively resolve a dispute. By building coalitions and capitalizing on existing social networks, you can gain support for your proposal, Salacuse writes. For instance, if you are relatively new to your organization, you might ask a senior partner who has worked closely with at least one of the two warring sales reps to help you resolve the conflict.

Adapted from “Beyond Blame: Choosing a Mediator,” by Stephen B. Goldberg (professor, Northwestern University), first published in the Negotiation newsletter.

When a negotiation escalates into a dispute, most managers understand the value of seeking out a mediator for professional assistance with the matter. The question of whom to hire, however, is less clear-cut. What type of expertise should your mediator have, and where should you look for him?

When choosing a mediator, keep in mind that you need not accept the proposals that he makes. In other words, you have total power to prevent mediation from leading to an undesirable outcome. As a result, the only risk of mediation is that you will expend time and money without reaching agreement. Indeed, one Fortune 100 company is so firmly convinced of the value of mediation that, as long as the other party seems to genuinely want a good-faith resolution, it will get a list of experienced mediators from a reputable and neutral mediation agency and let the other side select anyone on the list.

For those new to mediation, begin by getting a list of mediators from a reputable provider agency. You can find these agencies by searching under “dispute resolution” on the Internet and/or by inquiring with your organization’s legal department. You should ask the mediators for the names of the chief negotiators for each party in the last three cases that they mediated. (The chief negotiator will typically have been the party’s lawyer, although this is not always the case.)

Next, contact these chief negotiators and question them about their experiences with the mediators that you’re considering. The results of my research on the talents of successful mediators can serve as guidelines during this process. I surveyed 30 of the top mediators in the United States. According to these expert mediators, their success comes from focusing on three key areas:

1. Rapport. The mediators agreed that the key skill of a successful mediator is the ability to develop rapport—a relationship of understanding, empathy, and trust—with each of the disputing parties. A sense of rapport can encourage parties to communicate fully with the mediator, often providing her with the information she needs to find a mutually acceptable settlement. One mediator said that rapport is essential to building the trust needed for parties to share “their interests, priorities, fears, weaknesses.” “This information is often the key to settlement … their telling me what they haven’t told the other party,” the mediator said.

2. Creativity. Another key talent of successful mediators is creativity—the ability to generate novel solutions. This ability clearly springs from a focus on interests. Only by understanding each party’s interests can a mediator generate creative solutions that satisfy each party. “It is vitally important to be able to think of new ways of dealing with issues,” one mediator told me, “inventing options that acknowledge feelings, perceptions, and hurts that might otherwise block meaningful and fair resolution.”

3. Patience. It is also important that your mediator be patient, giving you and your opponent as much time as you need to fully express emotions and ideas, while at the same time focusing intently on the primary task—dispute resolution.

“I am tenacious,” one mediator said. “I don’t give up. I have sat with parties who have claimed they simply don’t see a way to a resolution and said, ‘Well, we’ll just sit for a while and think more on it.’ Most parties are loath to send the mediator packing, so they sit and usually think of something, especially if I occasionally throw out an idea.”

Adapted from “Make the Most of Mediation,” first published in the Negotiation newsletter.

As compared with other forms of dispute resolution, mediation can have an informal, improvisational feel. Mediation can include some or all of the following six steps, writes Kimberlee K. Kovach in The Handbook of Dispute Resolution (Jossey-Bass, 2005):

1. Planning. Before mediation begins, the mediator helps the parties decide where they should meet and who should be present. Each side might have lawyers, coworkers, and/or family members on their team, depending on the context.

2. Mediator’s introduction. With the parties gathered together in the same room, the mediator introduces the participants, outlines the mediation process, and lays out ground rules. She also presents her goal for the mediation—for example, to help the parties come to agreement on the issues under dispute and improve their relationship.

3. Opening remarks. Following the mediator’s introduction, each side has the opportunity to present its view of the dispute without interruption. In addition to describing the issues they believe are at stake, they may also take time to vent their feelings.

4. Joint discussion. After each side presents its opening remarks, the mediator and the disputants are free to ask questions with the goal of arriving at a better understanding of each party’s needs and concerns. Because disputing sides often have difficulty listening to each other, mediators act like translators, repeating back what they have heard and asking for clarification when necessary. If parties reach an impasse, mediators diagnose the obstacles that lie in their path and work to get the discussion back on track.

5. Caucuses. If emotions run high during a joint session, the mediator might split the two sides into separate rooms for private meetings, or caucuses. Often, but not always, the mediator tells each side that the information they share in caucus will remain confidential. The promise of confidentiality can encourage disputants to share new information about their interests and concerns.

6. Negotiation. At this point, it’s time to begin formulating ideas and proposals that meet each party’s core interests—familiar ground for any experienced negotiator.

The mediator can lead the negotiation with all parties in the same room, or she can engage in “shuttle diplomacy,” moving back and forth between the teams, gathering ideas, proposals, and counterproposals.

When putting together your settlement proposal, professor Stephen B. Goldberg of Northwestern University recommends that you ask the mediator for her advice. Her conversations with the other side have probably given her knowledge of its interests that you can use when packaging your proposal.

About 80% of dispute mediations lead to resolution, according to Goldberg. Depending on the complexity of the issues, mediation might last mere hours, or it could take days, weeks, or months to resolve. Some resolutions will truly be “win-win”; others will be just barely acceptable to one or both sides—but better than the prospect of a continued fight or court battle. If the parties come to consensus, the mediator will outline the terms and may write up a draft agreement. If you fail to reach agreement, the mediator will sum up where you have left off and may engage you in a discussion of your nonsettlement alternatives.

Guhan Subramanian is one of the most prominent — and ambitious — legal academics of his generation. The 39-year-old is the only person who’s ever held tenured positions at Harvard’s law and business schools, and on the side he advises companies on M&A and corporate governance. After authoring numerous academic papers and a corporate law textbook with former Delaware Chancellor William Allen and Harvard Law’s Reinier Kraakman, Subramanian is set to publish “Negotiauctions: New Dealmaking Strategies for a Competitive Marketplace” next month with W. W. Norton & Co. Click here to read the full article.

Adapted from “Why You Should Question Your Agent’s ‘Objective’ Advice,” first published in the Negotiation newsletter.

You’ve found a beautiful condo that you’d like to call your own. You conduct a thorough assess¬ment of its value and identify several other ap¬pealing properties in the same neighborhood and price range. Believing you’ve found the magic bid, you phone your real-estate agent.
“Hmm…,” he says. “Sounds low. I’d bump it up by $10,000, just to be safe.”
This sounds high to you, but he’s the expert. Should you follow his advice?
Perhaps not. Whenever you negotiate through an agent, Deepak Malhotra and Max H. Bazerman note in their book, Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond (Bantam, 2007), the possibility of a conflict of interest—a clash between what’s best for you and what’s best for your representative—emerges.
It’s not that most agents are intentionally corrupt. Your realtor may truly believe that your happiness is his No. 1 priority. But if he will gain the most financially from a quick deal at a high price (and he probably will), he may find himself thinking of times when clients missed out on their dream homes by bidding too low—never mind that you have a few other dream condos in mind.
Federal and state governments typically try to minimize such problems by requiring full disclosure of conflicts of in¬terest, write Malhotra and Bazerman. Yet a 2005 laboratory study by researchers Daylian Cain, George Loewenstein, and Don Moore suggests that disclosure statements not only fail to reduce conflicts of interest but may actually exacerbate them. As it turns out, disclosure doesn’t ap¬pear to motivate us to examine our agents’ advice more carefully. Furthermore, disclosure gives advisers “strategic reason and moral license” to exaggerate their advice fur¬ther, according to Cain and his colleagues.
How can you prevent conflicts of interest from tainting your outcomes? Press your agent to back up advice with objective criteria—and check her advice against feedback from experts who don’t have a stake in your outcome. Finally, if your agent seems to be claiming more value than she creates, consider whether you can get a better deal on your own.

Adapted from “Dealing with Friends,” first published in the Negotiation newsletter.

We all know people who have “alligator arms.” When the restaurant check comes, they can’t manage to reach their wallets, or they quibble that they had the small tomato juice, and you had the large.

With our close friends, of course, the opposite tends to occur, with each person insisting on picking up the tab. Though motivated by mutual feelings of affection, these interactions can be awkward, even tense.

David Mandel, a scholar with Defence Research and Development Canada, recently conducted two experiments that tested how generosity affects negotiations among friends. Previous researchers had concluded that norms of fairness become more powerful between people with close ties. If that were the case, of course, friends would quickly agree on a fair price, and the deal would be done.

The situation is more complicated, Mandel found. Specifically, in his experiments, most sellers of a music CD bent over backwards to offer a generous price to their friends. In fact, the sellers’ asking prices were significantly lower than what their friends were willing to offer. Thus, these sellers assumed the curious stance of wanting to talk buyers down in price. (This finding is a reversal of the classic endowment effect, in which the owner of an object tends to value it more highly than others do.) Curiously, in Mandel’s studies, generosity toward friends proved to be something of a one-way street: when negotiating to buy from friends, participants were not motivated to overpay.

In dealings with friends, Mandel concludes, our attitudes and behavior vary depending on how the situation is framed and what “script” is evoked. The impulse toward generosity seems most powerful in exchanges in which “I am giving this to you.” When an allocation between two people is involved, however, a norm of fairness may dominate and suggest a 50-50 split. As a practical matter, that’s a graceful way of concluding a friendly dinner. And when friends have much more at stake—say, when one is selling a car or a house to the other—it’s wise to agree first on the appropriate process and principles to follow.

On Thursday, February 4, 2010, join us to celebrate the publication of Professor Robert Mnookin’s new book Bargaining with the Devil: When to Negotiate, When to Fight. This event is co-sponsored by Harvard Law School, the Program on Negotiation, and Facing History and Ourselves.

The evening will begin with a reception at 5:30 PM in Pound Hall 101 (1st Floor, Pound Hall, Harvard Law School Campus).  Following the reception, Professor Robert Mnookin, Harvard Law School Dean Martha Minow, Assistant Professor Gabriella Blum, and HLS Lecturer David Hoffman, founding partner, Boston Law Collaborative will discuss Bargaining with the Devil.

Copies of Bargaining with the Devil will be available for purchase.

Co-Sponsored by:

Adapted from “Gender Assertiveness and Implicit Sexism,” first published in the Negotiation newsletter.

Most gender research in negotiation has examined differences between women and men, such as the tendency of women to be more anxious about the process and to set lower aspirations than men. The question of how people react to female negotiators versus male negotiators has been less explored but is now receiving more attention.

Motivated by Laurie A. Rudman and Peter Glick’s finding that women are penalized to a greater extent than men for engaging in self-promotion, researchers Hannah Riley Bowles of Harvard University and Linda C. Babcock and Lei Lai of Carnegie Mellon University examined reactions to female assertiveness in negotiation. Bowles and her colleagues described a job candidate who was either male or female, and who either did or did not make several assertive requests for benefits in addition to pay, including gym membership and a personal-use computer. When study participants assessed the candidate’s “hireability,” they penalized both male and female applicants for engaging in assertive negotiation behavior. But, strikingly, they penalized women at more than three times the rate that they penalized men.

Many social psychologists would argue that most of this sexism was not intentional. Scholars have noted a societal shift during the past few decades from explicit sexism to implicit sexism. Explicit sexism is quite visible; the sexist actor (typically) is aware of his biased behavior. By contrast, perpetrators of implicit sexism are unaware of the bias in their actions. Even people with a strong desire to be fair engage in sexist behaviors that they’re not aware of.

Organizations need to address ways in which employees might act unethically without conscious thought. Simply stating that sexism is inappropriate may have limited effect. Training instead should focus on the implicit psychological forces that profoundly affect a variety of behaviors, including negotiation.

Adapted from “Putting on the Pressure: How to Make Wise Threats in Negotiation,” by Adam D. Galinsky (Professor, Northwestern University) and Katie A. Liljenquist (Assistant Professor, Brigham Young University), first published in the Negotiation newsletter.

On August 3, 1981, 12,000 air-traffic controllers went on strike after negotiations with the federal government about wages, hours, and benefits broke down. Then-president Ronald Reagan took an uncompromising stand, threatening the workers that if they didn’t report to work within 48 hours, they would lose their jobs.

On August 5, true to his word, Reagan carried out his threat and fired the 11,359 air-traffic controllers who had not returned to work. Many observers view Reagan’s controversial threat and follow-through as a pivotal moment in his presidency and the foundation for future political victories.

This story highlights the important role of threats in negotiations. Broadly speaking, a threat is a proposition that issues demands and warns of the costs of noncompliance. Even if neither party resorts to them, potential threats shadow most negotiations.

A wise threat satisfies your own interests and targets the other side’s interests. Consider whether the threat will truly help you achieve your broader goals. Issuing a threat might provide gratification, but it can also lock you into a course of action and could be costly. To assess whether a threat will satisfy or violate your interests, answer these three questions:

1. Is your threat based on emotion? Effective negotiators must be immune to momentary pressures and volatile emotions. And a threat should never be made under the influence of anger: multiple studies have linked anger to reduced information processing, risky behaviors, and clouded judgment. A reliable rule of thumb is never to make a threat that you did not plan in advance.

2. Will your threat incite a counterthreat that dwarfs your own? Driven by reaction and revenge, threats often provoke counterthreats. Before making a threat, assess the potential impact of a retaliatory response, lest you initiate a battle that you aren’t prepared to fight.

3. Will the threat cost you more than it will cost the other side? Threats are not about punishing the opposition; they are about fulfilling your own interests. When you forget this important point, your desire to teach the other side a lesson may cause you to escalate a threat without regard to the toll it could take on you.

If you’ve determined that a threat would indeed serve your interests, make sure the threat will function as a motivator, not a punishment. Frame it in terms of how compliance will further your counterpart’s interests rather than how noncompliance will thwart them.

Imagine a dispute between a handheld computer company, Jansen, and a community hospital, Riverside. Jansen wanted to become a leading player in the lucrative health-care market. At the same time, Riverside needed handheld computers to increase efficiency and improve its precarious financial situation. Jansen and Riverside agreed on an information management system but, once it was installed, they argued about whether customized software was included in the deal. Without the specialized software, Riverside might be forced into bankruptcy and Jansen probably would not be paid.

Riverside could have threatened to secure the software in the language of punishment: “If we can’t reach agreement, you’ll see little of your money.” Instead, it framed the threat in terms of Jansen’s broader interests: “If we are forced into bankruptcy, you’re unlikely to make progress in this attractive market. However, if we can reach an agreement, you will be seen as our savior and could become a market leader.” By centering the threat on the benefits of compliance, Riverside increased the probability of reaching an integrative agreement.

Adapted from “Overcoming Stage Fright: How to Prepare for a Negotiation,” by Michael Wheeler (Professor, Harvard Business School), first published in the Negotiation newsletter.

Many negotiators grow anxious as they approach the bargaining table, a reaction that puts them in good company with other distinguished professionals. Laurence Olivier’s stage fright almost ended his acting career. Even after winning nine NBA titles in a row, basketball great Bill Russell still got sick before every game. Few negotiators suffer to this degree, yet even veterans admit to queasiness and butterflies as they anticipate the first moments of the process.

The beginning steps in negotiation are all the more daunting because their consequences often are unforeseeable. Openings feel momentous because they require us to commit to some actions and forgo others. Should we be open and friendly at the outset, or should we be more firm and detached?

Unfortunately, we cannot maintain all of our options. But three practices can temper our discomfort at closing off options:

1. Come equipped with a safety net. Good negotiators approach the bargaining table with their best alternative to a negotiated agreement— BATNA—already in place. A strong walk-away alternative will not only strengthen your bargaining power, but it also will help put you at ease.

2. Be prepared. That means knowing the substance of the transaction, of course, but it also means recognizing that you’ll need to be open to discoveries about the contours of a possible deal and the people you’ll be dealing with. Think of the preparation as putting together a jigsaw puzzle: the pieces you have in hand tell you something about its overall pattern.

3. Practice “recovery routines.” This way you’re ready for surprises, pleasant or otherwise. Don’t worry about having a snappy comeback for caustic comments; glibness may win the verbal battle but lose the problem-solving war. Instead, in a neutral tone, repeat what the other person just said to give her ownership of the remark. Likewise, if you’ve put your foot in your mouth, apologize quickly. Buying a little time can lower tensions and reduce anxiety.

Adapted from “When Umbrella Agreements Spring Leaks,” first published in the Negotiation newsletter.

This past November, in an unusual move, Costco, the largest wholesale club in the United States, removed Coca-Cola products from its shelves and posted messages telling shoppers that Coke products would not be available until the company lowered its prices. Coke products returned to Costco shelves within a few weeks, but the dispute shed light on the dog-eat-dog nature of price negotiations between manufacturers and retailers.

Negotiators tend to want the best of both worlds. When reaching agreement, they want to nail down parties’ respective rights and responsibilities, but they also want to retain the flexibility to deal with ever-changing business conditions.

One solution to this apparent dilemma is to craft umbrella, or framework, agreements. (The term umbrella is more commonly used in the business world, while framework is more widely used in legal and diplomatic circles.) Such agreements set out general principles that will apply to more specific give-and-take contracts in the future. An umbrella agreement between a soft-drink company such as Coca-Cola and a retailer such as Costco, for example, would typically cover issues such as exclusivity, invoicing, confidentiality, and termination. Subsequent short-term contracts would set prices and promotional allowances for specific products.

In theory, working on these two different levels benefits everyone, as it allows customers and suppliers to create stable relationships even when market changes are largely unpredictable. However, marketing lecturer Stefanos Mouzas at the University of Bath’s School of Management, in England, cautions that the stronger party may be able to increase his advantage by insisting on favorable terms in the umbrella agreement that limit the other side’s ability to win when the parties subsequently try to hammer out dollars-and-cents deals. For example, suppliers often complain that they are held hostage by the general terms imposed by “big box” stores like Wal-Mart. Then again, some retailers grumble about manufacturers whose attitude seems to be “My way or the highway.”

Mouzas concludes that the virtue of umbrella agreements is that they give parties room to adapt to changing business conditions. When such contracts are one-sided, however, they can tilt the bargaining table in future negotiations and even lead to public disputes.

Adapted from “Dealing with a Spoiler? Negotiate Around the Problem,” by Robert C. Bordone, Clinical Professor, Harvard Law School, first published in the “Negotiation newsletter.”

At one time or another, most of us have confronted a fellow negotiator who seemed intent on blocking even our most reasonable requests and actions. This was the situation faced by Alexis, the CIO at a midsize publishing company. Phil, the company’s CEO, hired Alexis to create an online information system tailored to the needs of their largest customers. Phil promised to support Alexis as she implemented the new system and restructured the IT department. The two met on many occasions to negotiate issues related to cost, increased staff needs, impact on customers, and coordination challenges.

Despite his promises of cooperation, in almost every meeting with Alexis, Phil proved to be a barrier to her problem-solving efforts. He repeatedly denied her request to increase the size of her staff, limited her authority, and delayed making important decisions. To her frustration, Alexis faced huge project delays, rising costs, and low credibility throughout the organization. She felt stuck between two unhappy choices: accepting the status quo or starting another job search.

When interpersonal and tactical strategies fail to win over someone whose approval is essential to your goals, the negotiation may seem hopeless. Fortunately, there is an option of last resort. Consider crafting a workaround—a strategic approach to getting what you need without the involvement or support of your adversary.

Here’s one way. If your counterpart is holding out simply because the cost of doing so is low and the possible benefits are high, consider building coalitions that exploit what professor James Sebenius of Harvard Business School has termed patterns of deference, or the tendency for parties to follow influential others on a particular course. By increasing the number of players in the game, you can restructure talks in your favor.

To begin, make a list of current and potential parties who may be able to influence the spoiler on your behalf. Next, consider each party’s interests and the patterns of deference that exist among them and with the target. Map these relationships backward to your target and construct an optimal sequence of approach. Finally, make your case to these individuals. By the time you reach your target, you should find that you’ve amassed a strong coalition.

Attempting such a workaround, Alexis listed key individuals inside and outside the publishing house who might be affected by the IT department’s ability to deliver the new online system, including several department heads and the buyers for a number of chain bookstores. After assessing these parties’ interests and likely patterns of deference, Alexis concluded that Phil, the CEO, had great respect for David, the firm’s marketing director. David, in turn, was extremely sensitive to the needs of the firm’s largest customers.

Alexis approached a buyer’s rep with one of the bookstore chains, someone she had worked with in the past. She discussed the benefits of the new system to bookstores and explained that internal challenges could stall implementation. The customer was persuaded to lobby David to get the system up and running. Alexis then met with David and explained that her project was strapped for resources. To her relief, David agreed to speak with Phil. Two days later, Phil gave Alexis the green light to hire the technical staff she needed to get the job done.

A workaround based on coalition building comes with certain risks, especially when it leads you to violate traditional channels of communication within your organization. Alexis’s decision to approach an important client about sensitive internal issues could have backfired. For this reason, enlist only those you know and trust to your cause.