Tag Archives: Michael Schaerer

Nothing to Lose: Effective Negotiating Even When “Powerless”

Michael Schaerer

Most negotiators prefer to have a “fall back position.”
However, having no alternatives and less power than co-negotiators can improve outcomes, found INSEAD’s Michael Schaerer and Roderick Swaab with Adam Galinsky of Columbia.

When an alternative is weak, it can undermine negotiating outcomes.
An alternative can establish ananchor point, a frequent cognitive bias characterized by overvaluing one piece of information, according to Hebrew University’s late Amos Tversky and Daniel Kahneman of Princeton.

Adam Galinsky

Adam Galinsky

People with weak alternatives often make lower first offers than negotiators with no alternative.
“Lowball” first offers usually undermine a negotiator’s final outcome.

Professional athletes and their agents provide examples of negotiating better deals when they have no “back up” offers and “nothing to lose.”  They can set ambitious anchor points, and may arrive at a more favourable settlement.

Amos Tversky

Amos Tversky

Schaerer and team asked a hundred people whether they would prefer to negotiate a job offer with a weak alternative or without any alternative.
More than 90 percent of participants preferred an unattractive alternative offer, confirming the assumption that any alternative is  better than no alternative.

Schaerer asked volunteers to imagine trying to sell previously-owned music in one of three conditions when they had:

  • No offers (no alternative),
  • One offer at USD $2 (weak alternative),
  • A bid at USD $8 (strong alternative).
Roderick Swaab

Roderick Swaab

Volunteers in each group proposed a first offer, and rated the degree of power they felt.
People with the “strong” alternative felt the most powerful and those with no alternative felt the least powerful.

Volunteers with a weak alternative felt more powerful than those with no alternative, but they made lower first offers.
This signaled that they had less confidence than participants with no alternative.
Conclusion: Having any alternative can help people feel powerful but can undermine negotiation performance.

Schaerer’s team investigated by pairing a  “seller,” who offered to sell a coffee mug to a potential “buyer.”

Before meeting, the seller received a phone call from “another buyer,” who was a confederate of the researchers.
The potential buyer either made a low offer for half of the sellers or declined to bid for the remaining sellers.

Daniel Kahneman

Daniel Kahneman

Sellers without an alternative offer said they felt less powerful, but made higher first offers and received significantly higher sales prices than negotiators with an unattractive alternative.

In another situation, half of the “sellers” concentrated on available alternatives (none, weak, or strong) and the remaining negotiators focused on the target price.

Volunteers with unappealing alternatives negotiated worse deals than those with no options when they focused on alternatives.
“Sellers” avoided this pitfall by concentrating on the target price.
Conclusion:  Focus on the goal when alternatives are weak.

Negotiators with non-existent or unappealing alternatives can set audacious goals and make an ambitious opening offer because they have the benefit of “nothing to lose.”
This strategy usually renders better results for the disadvantaged negotiator.

  • How do you overcome lowball anchoring when you have few negotiation alternatives?

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Individual Talent Surplus Can Reduce Team Performance 

Roderick Swaab

Roderick Swaab

More talent on a team doesn’t always increase team performance, particularly when team member must coordinate their efforts.

In fact, status conflicts based on talent differences can undermine team coordination during hand-offs for interdependent tasks, found INSEAD’s Roderick I. Swaab and Michael Schaerer, with Eric M. Anicich and Adam Galinsky of Columbia and VU University Amsterdam’s Richard Ronay.

Michael Schaerer

Michael Schaerer

Swaab and colleagues confirmed that most people believe there is a linear relationship between talent and performance:  They expect that more talent is consistently associated with improved performance.

However, the research team found an exception to this presumed rule when they analyzed National Basketball Association and Major League Baseball team and player data from 2002 through 2012.

Eric M. Anicich

Eric M. Anicich

They evaluated team performance in interdependent game tasks in basketball, a “zero sum game” because when one player shoots other players lose the opportunity to shoot at that time.
As a result, basketball players must coordinate efforts to position team members for as many shots as possible in a limited time.

Richard Ronay

Richard Ronay

In contrast, Swaab’s group studied independent sports performance in baseball.
In this game, players hit the ball in an assigned order and one player’s turn at bat does not eliminate another player’s turn to hit.
Further, each baseball player may hit a home run independent of other teammates’ batting skill, so each individual’s talent additively contributes to the team outcome.

Adam Galinsky

Adam Galinsky

Swaab’s team found that more talent is not associated with better performance when team members needed to coordinate interdependent tasks, as in basketball.
They called this the “too-much-talent effect”:  “When teams need to come together, more talent can tear them apart.”
In this case, they concluded that role differentiation is essential for optimal performance during interdependent tasks to ensure diverse capabilities in addition to willingness to collaborate.

Boris Groysberg

Boris Groysberg

This finding can be generalized to business organizations, which may experience decreased team performance if highly talented team members are unable to collaborate on interdependent tasks.
In addition, a surplus of top talent can undermine an organization’s profitability due to the high cost of attracting and hiring “stars.”

This “too-much-talent” effect was also demonstrated among Wall Street sell-side equity research analysts by Harvard Business School’s Boris Groysberg and Jeffrey T. Polzer with Hillary Anger Elfenbein of Washington University.

Hillary Anger Elfenbein

Hillary Anger Elfenbein

Increasing the number of talented analysts increased the firm’s overall performance to a point, then more stars actually decreased performance.
This effect was especially prominent when strong performers were concentrated in a small number of sectors.

As in professional sports, this “too-much-talent” effect could reflect a suboptimal integration and collaboration among analysts with similar expertise, controlling for individual performance, department size or specialization, or firm prestige.

Jennifer R. Overbeck

Jennifer R. Overbeck

Laboratory studies with volunteers confirm observations of the “too-much-talent” effect among professional athletes and Wall Street analysts, in research by University of Utah’s Jennifer R. Overbeck, Joshua Correll, and Bernadette Park.

They concluded that task groups need a few high-status members as leaders, and many more member-followers to contribute and implement work while supporting group direction.

Arthur Colman

Arthur Colman

When this “status sorting” is not explicit, Overbeck and team noted that a differentiated status hierarchy will evolve as status-seeking members vie for authority.
In rare cases, status sorting must be implemented through organizational design and responsibility definition, echoing earlier observations by University of California San Francisco’s Arthur D. Colman and W. Harold Bexton of the A.K. Rice Institute.

  • How have you managed “too-much-talent” effect in organizations?
  • To what extent do you encourage “status sorting” in your organization?

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