Jed Cohen

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Biased Negotiations

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I’ve already written about how I am a virtual intern for CAREEREALISM, a a blog/discussion forum focused on offering advice concerning the shifting concept of “career.”  Well, I have a guest post up at CAREEREALISM today called “Negotiating with Employers – It’s Not As Bad As You Think.”

The post came about because I started writing the following piece on some common mental biases that occur during negotiation.  As I was writing, I realized that I needed to provide a whole bunch of background information to make sense of what I talk about.  So I wrote a bit on integrative negotiation and realized that it was right up CAREEREALISM’s alley.  I sent it to JT O’Donnell, who graciously agreed to post it and made it CAREEREALISM friendly.

So go and check it out!  And then come back and read the rest of this – my original post on negotiation biases (you can just read the rest of this without visiting CAREEREALISM, but I do use a few terms that are defined there and not here).  So without further ado….

Biased Negotiations

Negotiations can be highly charged affairs.  People tend to get emotionally invested, and reason can often go right out the window.  So it can help to have a grasp of some common psychological traps that can harm you during the course of a negotiation.  We’re going to look at three here:

  • The agreement bias
  • The anchoring and adjustment heuristic
  • Framing

The agreement bias

This is exactly what it sounds like – being biased in favor of reaching an agreement.  The problem here is that people fail consider their alternatives!  If the offer on the table is worse than your BATNA (best alternative to a negotiated agreement), it’s up to you to recognize it and take the appropriate action (that would be to turn the offer down, in case you were wondering).  Just be sure not to do the opposite, which is to walk away from the table when the deal is good.

Anchoring and adjustment heuristic

The second tendency is the anchoring and adjustment heuristic.  If you haven’t heard of the term before, a heuristic is a basic guide to decision-making during complex situations.  It’s kind of a mental shortcut, and a good portion of the time these basic psychological rules will give you the right answer.  This is one of those times when it is not your friend.  The anchoring and adjustment heuristic says that when primed with an initial reference point, we start there and move towards our end goal.  But we don’t move enough.  (Want to learn more?  Read Amos Tversky and Daniel Kahneman’s original paper on heuristics).

Anchoring and adjustment tells us that when you walk into a negotiation, you want to be focused on your target price and not your reservation price.  Why?  Because if you start out primed with a low set of numbers, you’re not going to move as far up as if you started high and moved down.  Keep this in mind when considering numbers thrown out by the other party – they can anchor you just as well as your own needs and wants.  Anchoring and adjustment can also be used to your benefit though; making the opening move can anchor the other party as well.  Just be aware of overstepping your bounds based upon the social dynamic between you and the other party.

Framing

Framing is all about context.  The way we are exposed to a deal can impact how we approach it.  The effect of framing can be summed up as “losses loom larger than gains.”  In other words, if I position something in terms of what you gain from accepting my terms, you’re more likely to avoid risk than if I position something in terms of what you loose by not accepting.  This can be tricky during negotiations, as the way you perceive a proposal can influence your willingness to take risk.

Overcoming your own mind

Hey, I never said this would be easy.  Or simple – negotiating is complicated.  But you’ve actually taken the first step towards overcoming biases during negotiations – you’ve read this.  Now that you know about these mental quirks, you can watch your own behavior for them and work on overcoming them.

Which is why the best advice I can give you is this: practice.  Remember the old cliche “practice makes perfect?”  While you’ll never be perfect at negotiation, practicing can make you more comfortable and provide you with feedback that you can use to improve.  The more you try negotiating, the more comfortable you’ll be with your own style, and the better you’ll understand the highs and the lows.

Written by Jed

August 10th, 2009 at 8:28 am