Adapted from “Beware Your Counterpart’s Biases,” by Max H. Bazerman (professor, Harvard Business School), first published in the Negotiation newsletter.
Would you rather negotiate with someone who is rational or irrational? Too many negotiators falsely assume that bargaining with an irrational partner lends you a competitive advantage. You may think that you should use their mistakes to your advantage.
But consider that irrational negotiators are overconfident and uncreative. They may hold out for deals that you’ll never give them. They might assume that a supply of resources is fixed and, as a result, fail to explore tradeoffs among issues. When your counterpart is affected by judgment biases, he’s likely to make a variety of other mistakes that hurt not only his interests but yours.
For these reasons, your goal should be not only to identify the biases in the other side’s behavior but to confront these judgment mistakes—and, most often, to try to defuse them. Here are three simple rules for improving your own negotiation performance by anticipating, identifying, and, when possible, neutralizing the judgment biases of others:
1. Don’t force the other party into a quick decision. Negotiators are more biased under pressure than when given time to think through a recent proposal. When you’ve made an offer that you believe is better than your competitor’s latest proposal, let the other party think it through rather than pushing for an immediate answer. When pressed for time, negotiators often say no when they should say yes.
If you’re confident that you are offering more than the other party can get elsewhere, encourage her to explore alternatives and get back to you after comparing your offer to others. Just as it’s in your interest to do your homework, you’ll benefit by encouraging your counterpart to research the facts.
2. Make it clear that you value some issues more than others and are happy to jointly explore mutually beneficial trades. Suppose you’re attempting to make a sale, and the other side demands a further concession on price. Rather than simply saying no, show your flexibility by suggesting possible tradeoffs on issues such as delivery time or contract length.
3. Use irrationality to create contingent agreements. Sometimes the best way to manage another negotiator’s judgment biases is not to cure them but to accept them. How? By making a bet that you expect to be favorable to you and costly to your counterpart.
Imagine that a salesperson claims that her product is measurably better than that of her competitor. You’re fairly sure that her claim doesn’t apply to your intended use of the product, but she insists that it does. You’d be willing to pay more for her product if it’s as good as she claims, but you don’t want to pay more and run the risk of being disappointed.
Rather than calling the salesperson a liar or trying to disprove her claim, try proposing a contingent agreement instead. Specifically, offer to pay her asking price if the product performs at the level she promises, but insist on a very large discount if it fails to meet the targeted performance level. If the salesperson was intentionally overselling, she will back away from your proposal. But if she actually is overconfident in her product, she’ll say yes, and you’ll get a very good deal. (Of course, if she turns out to be right, you will end up paying more for a better product—and find out that she is more rational than you believed.)
When built into a formal contract, contingent incentives or penalties can increase the odds of compliance with a deal. Contingent agreements also offer a novel opportunity for you to use the other side’s biases to your advantage in negotiation.
Discover step-by-step techniques for avoiding common business negotiation pitfalls when you download a copy of the FREE special report, Business Negotiation Strategies: How to Negotiate Better Business Deals, from the Program on Negotiation at Harvard Law School.
Related Article: Knowledge of Biases as an Influencing Tool
