Tag Archives: negotiation

Range Offers vs Point Offers in Negotiation for Advantageous Settlements

Daniel Ames

Daniel Ames

Many people hesitate to present a negotiation offer as a range of values because they are concerned that co-negotiators will anchor on the lower value in the range as a “reservation price” or “bottom line.”

Malia F Mason

Malia F Mason

In fact, range offers may lead to stronger outcomes, according to Columbia University’s Daniel R. Ames and Malia F. Mason.
They compared range offers with point offers in laboratory studies of negotiations.

First offers can be powerful anchors, despite their risk of bias and marginal accuracy, reported University of Chicago’s Nicholas Epley and Thomas Gilovich of Cornell.

Nicholas Epley

Nicholas Epley

Even more influential aredual anchors” in range offers because they signal a negotiator’s knowledge of value as well as politeness.
Ames and Mason suggested that
negotiator credibility and knowledge of value increase anchor potency. 
Coupled with interpersonal relationship “capital”, these factors determine settlement outcomes.

Thomas Gilovich

Thomas Gilovich

Range and point opening offers can have varying impacts, depending on perceived preparation, credibility, politeness, and reasonableness of the proposer.

Ames and Mason tested three types of negotiation proposal ranges:

  • Bolstering range, which includes the target point value as the bottom of the range and an aspirational value as the top of the range.
    This strategy usually yields generous counteroffers and higher settlement prices, and is a recommended approach.
  • Backdown range, which features the target point value as the upper end of the range and a concession value as the lower offer.
    This approach often leads to accepting the lower value and is generally not recommended.
  • Bracketing range, which spans the target point offer and tends to have neutral settlement outcomes for the offer-maker.
    Compared with point offer-makers, bracketing range offers provided some relational benefits because they were seen as less aggressive.
Martin Schweinsberg

Martin Schweinsberg

Extreme anchors can be seen as offensive, and may lead to negotiation breakdown, according to INSEAD’s Martin Schweinsberg with Gillian Ku of London Business School, collaborating with Cynthia S. Wang of University of Michigan, and National University of Singapore’s Madan M. Pillutla.
Somewhat surprisingly, they found that negotiators with little power were more likely to walk away from extreme anchors.
Also surprisingly, high-power negotiators were equally offended.

Gilliam Ku

Gilliam Ku

Previously, Mason and team showed the benefit of precise single number offers, and the current research shows the value of less precise range offers.

Mason and team argue that point offers and range offers are independent and interactive informational processes with influence on settlement values: “…bolstering-range offers shape the perceived location of the offer-maker’s reservation price, (and) precise first offers shape the perceived credibility of the offer-maker’s price proposal.

  • When do you prefer to present a precise, non-rounded negotiation offers instead of a negotiation range?

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Nothing to Lose: Effective Negotiating Even When “Powerless”

Michael Schaerer

Most negotiators prefer to have alternatives as 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.

Alternatives enable negotiators to gain concessions from co-negotiators because they have a BATNA – Best Alternative To a Negotiated Agreement, defined by Harvard’s Roger Fisher and William Ury.

Roger Fisher

Roger Fisher

When an alternative is weak, it can undermine negotiating outcomes more than having no alternative because it establishes an “anchor point” based on competing options.

Anchoring is a frequent cognitive bias characterized by overvaluing one piece of information, according to Hebrew University’s Amos Tversky and Daniel Kahneman of Princeton.

William Ury

William Ury

Typically, negotiators anchor on the value of their alternatives when making their first offer, so people with weak alternatives generally make lower first offers than those with no alternative.
“Lowball” first offers based on few or poor alternatives usually undermine a negotiator’s final outcome.

Professional athletes and their agents provide many anecdotal examples of negotiating better deals when they have no “back up” offers and “nothing to lose” because they can set ambitious anchor points.

Amos Tversky

Amos Tversky

In a separate study of job negotiation, 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 indicated that they would prefer to enter the negotiation with an unattractive alternative offer, confirming the popular assumption that any alternative is seen as better than no alternative.

Another of Schaerer’s lab studies asked volunteers to imagine they were selling a used music CD by The Rolling Stones.
They randomly assigned participants to three groups and gave each group different information about their alternatives, ranging from:

  • 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.
Not surprisingly, people with the strong alternative felt the most powerful and those with no alternative felt the least powerful.

However, people with a weak alternative felt more powerful than those with no alternative, but they made lower first offers, signaling less confidence than participants with no alternative.
Having alternatives, whether poor or attractive, may make people feel powerful but can undermine negotiation performance.

Schaerer’s team further explored this paradox by pairing participants as a  “seller” who was offering a Starbucks mug during a face-to-face meeting, and a potential “buyer.”

Adam Galinsky

Adam Galinsky

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

“Sellers” without an alternative offer said they felt less powerful, but made higher first offers and received considerably higher sales prices than negotiators with a 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 without other options when they focused on alternatives, but “sellers” avoided this pitfall by concentrating on the target price.
This is another validation of focusing on the goal when alternatives are weak, and of the power of first-offer anchors.

Negotiators with non-existent or unappealing alternatives benefit from caution in setting modest first offers driven by feeling powerless.
Instead, the situation can be reconstrued as an opportunity to set audacious goals, reflected in an ambitious opening offer.

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

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“Precise” Offers Provide Negotiation Advantage

Malia F Mason

Malia F Mason

Opening negotiation offers typically “anchor” the discussion and shape settlement values.
Many people make opening offers in “round” numbers like $10 instead of “precise” numbers like $9.
However, “round number offers” were less powerful than “precise” offers in negotiations, found Columbia’s Malia Mason, Alice J. Lee, Elizabeth A. Wiley, and Daniel Ames.
This finding suggests that negotiators can improve their outcomes by specifying offers more precisely, such as $103.

Y Charles Zhang

Y Charles Zhang

Precise first offers more potently anchored the negotiation range than round number proposals, perhaps because those who proposed precise offers were perceived as more confident, credible, and “well-informed” regarding actual value.

Norbert Schwartz

Norbert Schwartz

This finding complements observations by University of Michigan’s Y. Charles Zhang and Norbert Schwarz of University of Southern California that consumers have less confidence in precise estimates when they doubt the communicator and when they engage in less “cooperative conversational conduct norms” during negotiations.

H Paul Grice

H Paul Grice

These norms, defined by Berkeley’s H. Paul Grice in Grice’s maxims, which advocate communicating:

  • Briefly,
  • Clearly,
  • Relevantly,
  • Truthfully,
  • Offering only as much and content as required.

Despite the apparent advantages of more precise offers, these could signal “inflexibility” to some co-negotiators.
As a result, people who received precise offers generally made more conciliatory counter-offers, leading to smaller adjustments and more favorable final settlements.
Precise offers also led to better final deals even when the negotiator opened with a less ambitious, but precise offer.

Martin Schweinsberg

Martin Schweinsberg

Another benefit of precise offers is that they are less likely to offend a co-negotiator by signaling aggression or greed, according to INSEAD’s Martin Schweinsberg collaborating with Gillian Ku and Madan M. Pillutla of London Business School’s and Cynthia S. Wang of Oklahoma State University.
Ambitious first offers may lead a negotiation partner to walk away from the discussion, resulting in an impasse or stalled progress toward a final settlement.

Gillian Ku

Gillian Ku

In addition, negotiators who see themselves in a lower-power position are more likely to walk away, even though both low-power and high-power negotiators were equally offended by extreme offers.
Though an extreme offer may result in high rewards, it can be a more risky strategy than offering a more moderate precise offer.

Manoj Thomas

Manoj Thomas

Another advantage of more precise offers is that buyers may not recognize their actual magnitude:  Buyers underestimated the size of precise prices, particularly under uncertain conditions in studies by Cornell’s Manoj Thomas and Vrinda Kadiyali with Daniel H. Simon of Indiana University.

In fact, U.S. homeowner participants in their lab said they would pay a higher price quoted in precise numbers than when stated in round number in the team’s analysis of actual residential real estate transactions in two U.S. markets.
In fact, buyers actually paid more when list prices were precise in experiments by Thomas and team.

Vrinda Kadiyali

Vrinda Kadiyali

Precise offers provide some of the benefits of favorably anchoring negotiation discussions while reducing risks of extreme offers.

-*How effective have you found “precise” opening offers in achieving your negotiation goals?

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Women May Undermine Salary Negotiations with Excessive Gratitude

Negotiators and poker players know the value of limiting full self-disclosure in words and non-verbal expressions.

Andreas Leibbrandt

Andreas Leibbrandt

However, some women undermined their salary negotiations by revealing their gratitude for a salary that exceeded their expectations in an experiment by Monash University’s Andreas Leibbrandt and John A. List of the University of Chicago.

John List

John List

Participants were women applying for administrative assistant jobs with a posted wage of $17.60 USD per hour.

Researchers told some volunteers that the wages were “negotiable,” and these women negotiated their pay upward by a ratio of more than 3 to 1.
This result echoes previous findings that women frequently do not negotiate unless given explicit permission, and consequently, have lower salary offers than those who negotiate.

Leibbrandt and List tested this hypothesis by not mentioning negotiation to the remaining participants, and these women typically provided “too much information” by remarking that the posted wage “exceeds my expectations. I am willing to work for a minimum of $12.”

-*Could this comment be “strategic ingratiation” to effectively influence a negotiation partner?

Edward E. Jones

Edward E. Jones

Consider three methods of ingratiation, outlined by Duke University’s Edward E. Jones:

  • Self-presentation (self-enhancement or “one-down” humility, providing favors or gifts),
  • Flattery (“other-enhancement” either directly or ensuring word-or-mouth report of positive yet credible comments),
  • Agreement (opinion-conformity, non-verbal matching-mimicry).

Although the ingratiator’s intent may be to enhance the future working relationship, this approach may be seen as “overselling” after a sales prospect agrees to a deal – and may lead to undoing the proposal.

In this case, the negotiation partner may question the applicant’s judgment, qualifications, and confidence, and may delay salary increases because the candidate appears satisfied with the offer.

Steven H. Appelbaum

Steven H. Appelbaum

When discerningly applied, ‘strategic ingratiation’ in organizations may result in personal rewards including promotion or pay increase, according to Concordia University’s Steven H. Appelbaum and Brent Hughes.

They found that effective use of “strategic ingratiation” was influenced  by situational factors and individual variables including:

  • Machiavellianism,
  • Locus of control,
  • Work task uniqueness.
Jeffrey Flory

Jeffrey Flory

In another of Leibbrandt and List’s randomized field studies, collaborating with Concordia colleague Jeffrey Flory, they found that among nearly 2,500 job-seekers, men did not wait for permission when no statement was made about salary negotiation, and in fact, male participants said they prefer ambiguous salary negotiation norms.
Despite women’s general hesitance to negotiate without an invitation, women advocated for more favorable salaries at about the same rate as men when they were invited to negotiate.

The team extended these findings by analyzing nearly 7,000 job-seekers with varying compensation plans.
In “competitive work settings,” salary negotiation was typically expected, and men stated a preference for these work environments.

Leibbrandt, List and Flory concluded that women accept “competitive” workplaces provided “the job task is female-oriented” and the local labor market leaves few alternatives.

Women looking for better salary outcomes benefit from proposing their “aspirational salaries” rather than waiting for permission to negotiate.
In addition, women negotiators can achieve better outcomes when they offer moderate expressions of gratitude and avoid revealing their “reserve” salary figure.

-*In what work situations have you benefitted from applying ‘strategic ingratiation’?

-*To what extent have expressions of gratitude in negotiation undermined bargaining outcomes?

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Negotiation Drama: Strategic Umbrage, Line-Crossing Illusion, and Assertiveness Biases

Daniel R Ames

Daniel R Ames

Ability to optimally match one’s style of assertiveness to specific situations can determine success as a leader and negotiator, according to Columbia University’s Daniel Ames and Abbie Wazlawek.

Abbie Wazlawek

Abbie Wazlawek

Earlier, Ames and Stanford’s Frank Flynn reported that moderate levels of assertiveness are associated with career advancement, and with effective negotiation and influence in conflict situations.
In addition, they found that most observers provided consistent ratings of managerial under-assertiveness and over-assertiveness.

Francis Flynn

Francis Flynn

However, most people do not accurately assess others’ evaluation of their assertiveness in specific situations.
Over-assertive individuals tend to have less-accurate self-perception than less assertive people, and both groups experience “self-awareness blindness.
These inaccurate self-perceptions may develop from polite yet inaccurate feedback from others, which provides faulty information.

A frequently-employed negotiation tactic is overly-emotional verbalizations during negotiations.
More than 80% of participants reported that they had expressed greater objections than they actually felt to influence the negotiation partner, and a different 80% of volunteers said they observed exaggerated objections by their negotiation partners.

Daniel Ames AssertivenessParticipants in Ames and Watzlawek’s studies reported whether they or their counterpart used these excessive emotional displays in negotiation role-plays.
In addition, they rated their own and their negotiation partner’s assertiveness styles.

Self-awareness resulted in most favorable negotiation outcomes: More than 80% of negotiators rated by others and by themselves as “appropriately assertive in the situation” negotiated greatest value to both parties.

Ames Assertiveness U CurveStrategic umbrage also appeared effective:  People who received strategic umbrage displays by their negotiation partners were more likely to rate themselves as over-assertive in their negotiation position.
However, negotiators who applied strategic umbrage rated these self-critical negotiation partners as appropriately assertiveness.
Ames and Watzlawek called this misperception of others’ perceptions the line-crossing illusion.

This mismatch between negotiation partners’ ratings of appropriate assertiveness was linked with poorer negotiation outcomes:  Just 40% of negotiators who were rated as appropriately but felt they were over-assertive (line-crossing illusion) negotiated the best possible deal for themselves and their counterparts.
This suggests that disingenuous emotional displays of strategic umbrage lead negotiation partners to seek the first acceptable deal, rather than pushing for an optimal deal.

Jeffrey Kern

Jeffrey Kern

To improve accuracy of meta-perception – other people’s perception of assertiveness style – Ames and Wazlawek suggested:

  • Participate in 360 degree feedback,
  • Increase skill in listening for content and meaning,
  • Consider whether the positions discussed in negotiation are “reasonable” in the situation in light of comparable alternatives and options,
  • Request feedback on “strategic umbrage” reactions, to better understand additional factors that modify perceptions of “offer reasonableness,
  • Evaluate costs and benefits of specific assertiveness styles:
    Gary Yukl

    Gary Yukl

    Over-assertiveness may provide the benefit of “claiming value” in a negotiation or but the cost may be ruptured interpersonal relationships and a legacy of ill-will, according to Jeffrey M Kern of Texas A&M as well as SUNY’s Cecilia Falbe and Gary Yukl.

  • Consider cultural norms for assertiveness regulation in “low context” cultures like Israel, dramatic displays are frequent and expected in negotiations.
    In contrast, “high context” cultures like Japan require more nuanced assertiveness, with fewer direct disagreements and “strategic umbrage” displays, according to Edward T. Hall, then of the U.S. Department of State.
Edward T Hall

Edward T Hall

Likewise, under-assertiveness may benefit by minimizing interpersonal conflict, but may lead to poorer negotiation outcomes and undermined credibility, in future interactions, according to Ames’ related research.

To augment a less assertiveness style:

  • Set slightly higher goals,
  • Reconsider assumptions that greater assertion leads to conflict, and consider that proactivity may lead to increased respect and improved outcomes
  • Assess the outcome of collaborating with more assertive others.

To modulate a more assertiveness style:

  • Make slight concessions to increase rapport and trust with others,
  • Observe and evaluate the impact of collaborating with less assertive others .

The line-crossing illusion is an example of a self-perception bias in which personal ratings of behavior may not match other people’s perceptions, and others’ behaviors can attenuate individual confidence and assertiveness.

*How do you reduce the risk of developing the line-crossing illusion in response to other people’s displays of “strategic umbrage”?

*How do you match your degree of assertiveness to negotiation situations?

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Do You Have Agreement Bias? Accept Bad Deals?

Taya Cohen

Taya Cohen

Agreement bias is the tendency to acquiesce in negotiation, even if that decision results in a disadvantageous outcome in business and interpersonal relationships.

During negotiation, participants may enter a “negative bargaining zone,” when their positions and interests diverge so much that there is little possibility of crafting a win-win resolution.
Skillful negotiators usually end the discussion if it is unlikely to move beyond the “negative bargaining zone.”

Leigh Thompson

Leigh Thompson

However, negotiators may be vulnerable to accepting a disadvantageous deal for several reasons, explained Carnegie Mellon’s Taya Cohen and Leigh Thompson of Northwestern with University of Toronto’s Geoffrey J. Leonardelli.

◦       Sunk Costs: Individuals may wish to achieve a resolution, even a bad one, to feel value was gained from the time and effort invested in the negotiation,

◦       Image: Participants may wish to be seen as likeable,

◦       Erroneous Anchoring: Individuals may assume that their interests and the negotiation partner’s are mutually exclusive, and may overlook innovative, “integrative” solutions,

◦       Strength in Numbers: Negotiators who are outnumbered by the opposite negotiation team are likely to acquiesce to suboptimal deals.

Geoffrey J Leonardelli

Geoffrey J Leonardelli

Negotiating teams tend to be less susceptible to agreement bias when discussions enter a negative bargaining zone, found Cohen, Thompson, and Leonardelli.

Solo negotiators demonstrated more agreeable behavior, and were more likely to agree to unfavorable conditions.
However, when solo negotiators were joined by only one person, they avoided agreement because they accessed additional decision support.

Douglas Jackson

Douglas Jackson

Agreement bias occurs in lower-stakes situations than person-to-person negotiation – anonymous surveys, reported Douglas Jackson, then of Educational Testing Services and Penn State.
This “yea-saying” propensity, called acquiescence bias, is triggered when people agree to survey items, no matter the content.

Samuel Messick

Samuel Messick

A major contributor to acquiescence bias was social desirability concern, confirmed in research by Jackson and his  ETS colleague Samuel Messick in a factor analysis of Minnesota Multiphasic Personality Inventory (MMPI) items.

Robin Pinkley

Robin Pinkley

In addition, faulty judgments can lead to poor negotiation outcomes like agreement, noted SMU’s Robin L. Pinkley, Terri L. Griffith of Santa Clara University, and University of Illinois’s Gregory B. Northcraft.

Terri Griffith

Terri Griffith

Pinkley’s group demonstrated ineffective outcomes when negotiators:

  • Accurately processed faulty and incomplete information (information availability errors),
  • Inaccurately process valid or complete information (information processing errors).
Gregory Northcraft

Gregory Northcraft

-*How do you guard against agreeing to bad deals?

-*How do reduce the possibility of Information availability errors and information processing errors?

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How Effective are Strategic Threats, Anger, and Unpredictability in Negotiations?

Most researchers conclude that negotiators who establish a collaborative atmosphere for a “win-win” solution achieve superior results.

Marwan Sinaceur

Marwan Sinaceur

However, Marwan Sinaceur of  INSEAD and Stanford’s Larissa Tiedens investigated the potentially-risky tactic of employing strategic anger in negotiations, and found that anger expressions increase expressers’ advantage and “ability to claim value” when negotiation partners think they have few or poor alternatives.

Larissa Tiedens

Larissa Tiedens

Sinaceur and Tiedens suggested that anger expression communicates toughness, leading most non-angry counterparts to concede more to an angry negotiator.
However, other studies report that people have more negative reactions when women display anger,

-*But what about the impact of “strategic” expressions of anger that aren’t actually felt?

Stephane Cote

Stephane Cote

Ivona Hideg

Ivona Hideg

University of Toronto’s Stéphane Côté collaborated with Ivona Hideg of Wilfrid Laurier University and University of Amsterdam’s Gerben van Kleef to evaluate the impact of surface acting (showing anger that is not truly felt) on the behavior of negotiation counterparts.

They found that disingenuous anger expressions can backfire, leading to intractable, escalating demands, attributed to reduced trust.

Gerben van Kleef

Gerben van Kleef

In contrast, “deep acting” anger that is actually felt, decreased negotiation demands, as demonstrated in Sinaceur and Tiedens’ work.

-*Are threats more effective than expressing anger in eliciting concessions in negotiation?

Christophe Haag

Christophe Haag

Sinaceur and team collaborated with Margaret Neale of Stanford and Emlyon Business School’s Christophe Haag, and reported that threats delivered with “poise,” confidence and self-control trump anger to achieve great concessions.
A potential negotiation “work-around” is expressing inconsistent emotions in negotiations.

Adam Hajo

Adam Hajo

Saraceur teamed with van Kleef with Rice University’s Adam Hajo, and Adam Galinsky of Columbia, and found that negotiators who shifted among angry, happy, and disappointed expressions made recipients feel less control over the outcome, and extracted more concessions from their counterparts.

Adam Galinsky

Adam Galinsky

Emotional inconsistency proved more powerful than expressed anger in  extracting concessions, so women may achieve superior negotiation outcomes with varied, unpredictable emotional expression.

-*How do you use and manage emotional expression in negotiations?

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