Why cooperating wins: Reputations, expectations and the fine art of negotiation
By Irene Kim
In a series of studies, O'Connor and Tinsley had pairs of MBA students at Georgetown and the Johnson School conduct week-long mock negotiations via e-mail (to mask any visual cues of toughness). For each pair, the researchers manufactured a reputation for one side as being "tough," "cooperative," or "unknown," and informed the other side of his or her partner's reputation.
"Cooperative" negotiators achieved the best deals, followed by those with unknown reputations. Not only did "tough" individuals achieve the worst results, but their partners said they were more likely to be deceptive and less creative. "Their partners assumed a whole constellation of traits and behaviors," says O'Connor. "And because of that, they just withheld – they went into a shell. That's death to negotiation."
For all, a bigger pie
"Many people tend to assume negotiation is a tug of war, and they want to tug harder than the other to win," says Tinsley. "This can lead to people being very competitive, being very careful about the information they reveal, and trying to pull as many concessions as possible from the other side."
In a "distributive" negotiation, which concerns only one issue, such as the price of a particular product, participants struggle for the largest share of a fixed pie. "While legitimate tactics, guarding information and pressing for concessions are 'distributive' behaviors that simply claim the apparent value already on the table," says Tinsley. "They do nothing to expand that value."
However, some apparently single-issue negotiations may actually involve multiple issues, and therefore have "integrative" potential. Cooperative negotiators can identify the integrative nature of a situation and explore the potential for solutions that benefit both parties. "If we're negotiating, and start to exchange information about what we really want, we may find there are very compatible interests, interests that can be traded off that expand the pool of resources and build our relationship," explains Beta Mannix, Ann Whitney Olin Professor of Management.
Negotiators who assume that a tough reputation will intimidate their partners into giving more concessions, however, may be shooting themselves in the foot. "A tough reputation could lead the other party to think, 'I should withhold information.' That makes the first party withhold information. Now both people are withholding information instead of revealing enough to find a mutually beneficial solution," explains Mannix.
Tough negotiators ignore the interdependence between themselves and their partners, Mannix explains. "You're just thinking about your own first move, not thinking through the entire series of moves and how the whole game will play out."
What's more, early moves can color the whole negotiation. Lount conducted a study, using an iterative Prisoner's Dilemma (see box) in which he found that people whose partner began the interaction with a competitive first move ended up trusting their partner less, even after the partner began cooperating. "There was a seed of distrust planted that seemed to remain throughout the interaction," says Lount, adding that, if one party shares a piece of information, the other is likely to follow suit.
Cooperation doesn't entail spilling one's guts upon sitting down at the negotiating table, however. "You want to cautiously cooperate," says Lount. "If the other person is very cooperative, making concessions and revealing information, it benefits you to do the same, because you'll reveal enough to create a truly integrative agreement," says Mannix. "If they tend to be tougher, you might have to be a little more cautious early on."
"Seasoned negotiators know that certain negotiations require some toughness, and other negotiations require something else," says O'Connor. "They know that negotiations require the ability to persuade; to shape the other's perception of what's possible; to identify creative deals and sell them to the other side; to integrate people's deeply held interests and turn that into a real, workable agreement."
The feel-good factor
Veteran negotiators understand that negotiation is about building relationships – both during a particular deal, and over the long run. Within a single negotiation, even a reputation for cooperativeness is no substitute for relationship building. O'Connor and Tinsley found that one partner's reputation for collaboration would encourage the other partner to actively probe for information right off the bat – causing the first partner to become wary.
What about huge corporations known for strong-arming their competitors, suppliers, anyone – and who command immense market share? Though forced to deal with 900-pound gorillas, most companies would probably prefer to deal with partners who give them a fair shake. "If I force you to accept my terms, we're not negotiating anymore," says O'Connor. Squeeze plays are simply not a sustainable strategy, agrees Lount. "If people feel shafted or mistreated or coerced into agreeing, it's going to increase the likelihood that they will seek justice or restore equity in their own way," he says.
O'Connor sees MBAs in her negotiation classes trying be "sharks." "I tell them, 'That can work today, but not tomorrow. No one will want to work with you tomorrow.'"
"Even though super-competitive people may sometimes outperform cooperative people on an individual negotiation, in the long run they'll be less likely to," concurs Lount. "Especially when they pair up against other competitors."
And, as O'Connor and Tinsley found, competitiveness makes walls go up. "In my classes, people don't want to negotiate with people who have a competitive reputation," says Lount. "In addition, cooperators who know they are dealing with competitive people will adopt a competitive orientation."
The best strategy is to build a track record that validates one's reputation. "My advice to students is to cultivate a reputation for collaboration," says O'Connor. "You'll attract more partners and that will give you more choices and better outcomes down the road."
Pitfalls and moving chairs
As great as it sounds, cooperation may not always be easy in practice. What if your employer rewards competitive behavior? Mannix has observed companies in which top management pitted employees against one another. "They incentivized the people throughout the organization in what people referred to as cannibalizing across silos – so if you could do better than someone in a different geographic region, you were rewarded," she says. "Everyone knew it wasn't good for the company."
And things can get lost in translation in cross-border negotiations. In different cultures disparate "scripts" can cause bumps. "While cooperation might not be defined differently in different countries, two Japanese negotiators might negotiate differently from two U.S. negotiators," says O'Connor. If a Japanese and U.S. negotiator get together, their mismatch in scripts might give the impression of uncooperativeness. Add to that, what's accepted in some countries can seem improper in others. Mannix points out that Americans' willingness to talk about personal matters such as family can signal cooperativeness to other Americans, but can put off people from other cultures.
What if you're just not sure how to cooperate? Mannix notes a tendency, by both MBAs and business executives, to guard the knowledge or information they have. "They don't necessarily want to be competitive, but they don't know what information they should give up, and how," she explains. "So the default is, 'I'll protect everything I have,' and that stance comes across as very competitive."
Fear and greed, also, can prevent people from cooperating. Most people playing Prisoner's Dilemma will defect, Mannix points out. "Most people recognize that if the other side defects while I cooperate, I'm worse off. The fear play is, I'm afraid they'll make me a sucker. The greed play is, I'll be better off."
O'Connor notes that some people may be afraid to say "no," and may make concessions to try to preserve a relationship. The problem is that their partners may see that as weakness. "You may be afraid you're going to make a mistake, or seem pushy or ungrateful, and the other side will rescind the offer. You're afraid of being rejected."
At the outset, it's important to recognize that negotiations can be stressful. "You can think of it as a challenge or a threat. If you see it as a challenge, you're more likely to reach out, share information, and do much better. If you feel threatened, you shut down or act tough," says O'Connor.
The "N" word
The very word "negotiation" seems to put some people on the defensive, says O'Connor, perhaps conjuring up visions of unshaven teamsters threatening to strike, or slick car dealers out to get your last dollar.
When counseling MBAs on job negotiations, O'Connor tells them not to mention the word "negotiation." "There's something about calling it a negotiation that makes people think 'it's you versus me,' while it's really you and me." Students conducting a "negotiation" exercise will set up two chairs facing each other, says O'Connor. "If you tell them it's a problem-solving exercise, they'll put them side by side."
Prisoner's Dilemma is an exercise in cooperation, often used to study the establishment of trust between two parties. The scenario: Two "prisoners" who have committed a crime together are given the choice of "cooperating" (not turning in the other person) or "defecting" (ratting on their partner). The partners are rewarded or punished in accordance with their behavior – in relation to that of the other person. For example, if both cooperate, both receive a somewhat shorter sentence; if one defects while the other cooperates, the defector is given a much shorter sentence while the cooperator is given a much longer one; if both defect, the sentences of both remain unchanged. Prisoner's Dilemma is commonly used by researchers in many fields, such as psychology, finance, and biology. The concept is generally attributed to Merrill Flood and Melvin Dresher, who developed it in 1950 in connection with the Rand Corporation's investigations into game theory.
How to be a better negotiator
Start small. "Start cooperating on small issues, things that are lower on your importance list. And wait for your partner to reciprocate," advises Lount. In a job negotiation, for example, bring up your interests regarding relatively unimportant issues – moving expenses and vacation time, for instance, rather than attacking the issue of base pay.
Offer multiple options. People like to have a choice. "Present multiple packages, maybe two or three combinations that would be equally satisfying to you," says Lount. "This will signal to the other party that you're being cooperative and flexible – even though all three are your ideal situation."
Know yourself. "Know what your goals are, as well as the lowest point you'd settle for," says Lount. "Of course, focusing on your goals will give better outcomes than focusing on your bottom line."
Do your homework. Before a negotiation, says Lount, "I have my students assess the other party's interests, what their options are, and that potentially helps them find tradeoffs and issues that might be compatible, as well as finding out what their bottom line might be."
Listen. "Toughness is about talking," says O'Connor. "You want to remain open to what the other is saying and try to learn what they really and truly care about, so you can see that interest represented in the deal." Leave room. "If you're being as fair as you can and can't move, your partner will be significantly less satisfied than if they got you to move a little bit – even if they end up with a worse deal," says Lount.
Picture yourself. "If people keep in mind how they appear to the other side while they're negotiating, they might do things differently," says O'Connor. "And, remember: People can't see what you're really like – they just see your behavior."
Shake hands. "You want your partner to walk away feeling it was worthwhile to work with you, because they got something out of the deal," says O'Connor. "No matter how hard you fought, you want to shake that person's hand and say, ‘You did a great job – you really squeezed that last dime out of me!' Even if they didn't really get anything, you want them to walk away happy.