Deepak Malhotra and Max H. Bazerman are professors at Harvard University and authors of the book Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond. This work is particularly interesting because, in addition to using common tools and concepts from Negotiation Theory, delves into the field of emotions, approaching negotiation processes from the perspective of Psychology.
Specifically, one of the most relevant parts of the book is the analysis of biases in negotiation. Biases occur in the heart and mind and “affect even the best and brightest”. Malhotra and Bazerman study: fixed-size pie bias, dazzling attributes bias, non-rational escalation of commitments bias as biases of the mind; conflicting motivations, egocentricity, overconfidence and irrational optimism, regret aversion as biases of the heart.
Below, we will analyse the chapter “How to negotiate rationally in an irrational world”, where these authors explain how to deal with the biases of the heart and mind in negotiation contexts, from the perspective of Minerva Strategy Blog.
Strategy 1 on how to deal with your own biases states: “Think according to system 2″. The Nobel Prize in Economics Daniel Kahneman In his work Thinking, Fast and Slow, he has analysed certain phenomena concerning the influence of Psychology in Economics, such as anchorage.
System 1, which corresponds to intuition, is generally fast and automatic, without the implicit and emotional effort with which we make most decisions in our lives. System 2 corresponds to reasoned thinking, is slower, requires effort, and is explicit and logical. You could say that we generally have “autopilot” in system 1, and if something does not work, system 2 kicks in.
The first recommendation in this strategy is: “Make a list for System 2”. Important decisions, therefore, in the business world should be made by System 2. In other words, they should be carefully considered, properly thought through, weighing up the various scenarios and values at stake. Do not be swayed by first impressions, impulses, or emotions, which are implicit in biases. Skilful management of these biases can be part of the business practices and tricks of the other party.
The second tip states: “Avoid negotiating under time pressure“. Time management is crucial in many negotiations. It is important to know how to deal with ultimatums, which, in many cases, are just another negotiating tactic. The key is that, with less time, it will be more difficult to properly analyse the negotiating map.
The third recommendation states: “Spread negotiations over multiple sessions”. To avoid unpredictability and improvisation in decision-making, it is beneficial to be able to negotiate over several sessions, allowing all relevant issues to be addressed from different angles with certainty.
Strategy 2, on how to deal with your own biases, states: “Learn by using analogies”. Experience is a source of knowledge; you learn from your mistakes. The authors summarise this approach by stating that “the key is to figure out how to extract principles from experiences and examples”. Precedents for a similar situation should be taken into account and their relevance in the course of events should be assessed.
The first tip in this strategy 2 is: “Study multiple negotiations simultaneously”. It is useful to learn about various strategies and negotiation frameworks similar to the one you are involved in. It is also beneficial, in light of this information, to map out various negotiation scenarios, with the possible outcomes for the parties involved.
The second recommendation states: “Focus on principles, not details”. The important thing is to identify the interests involved and what might be the best way to satisfy them for both parties. This is the most genuine area of negotiation, which reminds me of the principle of the Harvard Method: Focus on interests, not positions.
Strategy 3 on how to deal with your own biases states: “Adopt the outsider’s perspective”. The parties are sometimes so involved in a negotiation that the intervention of an impartial third party is necessary. This is even institutionalised in the form of negotiation mediators. Or, in some regulated cases, the parties may submit their case to arbitration by a third party.
Strategy 1 for dealing with other people’s biases states: “Incorporate the consequences of others’ biases into your strategy”. At this point, Malhotra and Bazerman seem to be saying that if others act on biases of the heart or mind, that is to say if they are irrational, we should build our strategies to take advantage of this in business interactions.
Strategy 2 for dealing with other people’s biases states: “Help others apply less biased criteria”. One thing you can share with the other party is the lesson of making decisions within a reasonable time frame, after conducting a thorough analysis, without emotional constraints, and detecting negotiating tactics and tricks.
Strategy 3 for dealing with other people’s biases says, “Weigh up the information provided by others”. Relevant data provided by the other party in business contexts should be routinely checked. A typical example is the price of an item for rent or sale. It is advisable to find out the market price of that item, whether for rent or sale, and compare it with the offer made. Some people complain about the purpose of these checks, as if they were a sign of a lack of trust. They simply seek to avoid bias in the negotiation because, as Malhotra and Bazerman argue, we seek to negotiate rationally in an irrational world.
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