Monday, November 6, 2017

On Applying Models of Negotiation to Real Life Challenges

This is the second blog is a new series called “From the Field”. In this series we spotlight stories and insights from former students, friends, and colleagues who are working in the field of dispute resolution.

 

By Sandy Vasher ’07

A few years ago, a new corporate negotiation trainer was shadowing me in a workshop I’d taught over and over for employees at a major Fortune 500 company. The workshop participants were buyers for the company, and one of their challenges was to negotiate cost reductions with suppliers while maintaining good relationships.

To explore relationship-building in the context of price negotiations, I employed a version of a classic prisoner’s dilemma game. In the game, participants were tasked with maximizing their profits over a series of low-communication “negotiations.” In each negotiation, two parties placed a “bid” to a hypothetical third-party and each received a payout dependent on the other party’s bid. There were three bid choices: a high bid, a medium bid, and a low bid. If both parties bid high, both would be rewarded with a high payout. If both parties bid low, both would receive a low payout. If one party bid higher than the other, the low-bidder would receive an even higher payout than if both parties bid equally high. Consequently, there was an incentive to cooperate but a greater incentive to “cheat” the other party…except that “cheating” nearly always resulted in a race to the bottom for both parties over time.

When we ended the game, I showed the participants the results. Some had done very well. Some had done poorly. I launched into a debrief about trust and communication.

The relationship between a corporate buyer and the buyer’s supplier can be very like the relationship between the parties in a prisoner’s dilemma game. Buyer and supplier have limited communication over many rounds of negotiation. Buyers reap short-term profits by negotiating low prices with their supplier, and vice versa, but both buyer and supplier do better over time when they can work together as strategic partners.

So I asked the group: what’s a good first move in this game? What would set you up for a long-term strategic partnership with your supplier?

The group talked over my question. A few people recommended beginning the game with the highest bid, but more thought the medium bid was a better start. I’d heard this before, and when I asked why, this group gave the same answer many buyers had offered me in the past: “I would never start a relationship with a supplier by paying them top dollar. That would be like sending a signal that I could be easily taken advantage of.” I agreed with the class. We concluded that for a buyer, starting a negotiation at a middle ground, then playing a “tit-for-tat” or “copycat” game (mimicking whatever your counterpart does turn-by-turn), with the goal of increasing cooperation as you go, is the best strategy for building trust with a supplier.

We moved on, but my new colleague—who was bright, enthusiastic, and not too many years beyond completing a degree in conflict resolution—pulled me aside later. He was troubled. I’d given everyone the wrong answer. In a prisoner’s dilemma game, the best economic outcome should result from starting with the most cooperative move, he said. That would best convey that you could be trusted. But I’d advised these buyers to start with a middle ground. Hadn’t I led them all astray?

Now, if you start looking for the “answer” to a prisoner’s dilemma game (go ahead, Google it), you will, no doubt, find quite a debate about what exactly one should do in such a game. There is a lot of evidence that tit-for-tat/copycat works and that you should start your prisoner’s dilemma games with the highest bid possible, as my new colleague had suggested. But for my workshop and the buyers in it, the debate missed the point.

After all, we weren’t playing the game to replicate an academic experiment for fun. We were playing to explore how corporate buyers think about building trust with their supplier counterparts. Based on their practical experience, the buyers in my workshop agreed that it would make sense to start a relationship by signaling that you can be trusted. But they did not see our game’s high bid as the move that would best send that signal. Instead, they related the high bid to a real-life action that would indicate the highest level of willingness to cooperate, such as paying top dollar to a brand-new supplier or being completely transparent with a supplier you’ve never worked with before.

The buyers saw such actions as naïve, and they recognized that trust does not come merely from being perceived as honest or fair. It also comes from being perceived as competent. Thus, for the buyers in my workshop, it was the middle bid, not the high bid, that they saw as the starting move that would best help them achieve trust with their counterparts. And for me as their trainer? I considered that a successful lesson. Because my purpose wasn’t for the buyers in that workshop to understand a prisoner’s dilemma game like economists or psychologists. I only wanted them to walk away from the game persuaded that trust is the bedrock to a long-term relationship, and that the best “first move” in a relationship is to show that you can be trusted.

I graduated from Harvard Law School in 2007, and over the last decade, I’ve made my career training negotiators. In the workshops I run today, I still rely heavily on many of the models and theories I learned in workshops at Harvard. However, if there’s one thing I’ve learned in the field, it’s that our academic models are only as good as their application to real-life problems and people. With that in mind, here are three tips for fellow practitioners applying interest-based models of negotiation to actual negotiations:

  1. Treat theories in training the same way you would treat positions in negotiation. They are starting points, but they were designed to solve some underlying problem or achieve some underlying goal. If applying a theory in real life isn’t getting you the result you want, ask: “does this application of the theory meet our underlying goal?” Usually, that means asking: is this going to increase collaboration, improve a business relationship, and/or empower a negotiator to act in a way that gets him/her a better outcome? If the answer is no, you may need to alter how you are applying the theory to get the result you want.
  2. Worry less about the terminology and more about principles and behaviors. The negotiation community has its own unique lexicon (BATNA, ZOPA, positions, interests, integrative v. distributive options, zero-sum game, aspirational point, walk-away point), but we forget that the purpose of all those labels is to get people to take different actions than they otherwise would have in a negotiation. A lot of the participants in my workshops want to learn to be more collaborative and confident negotiators. Very few of them are focused on learning lingo. So, while I do teach new vocabulary terms to my workshop participants, I try not to wince when I hear someone talking about their “BANTA.” After all, we pursue training to improve outcomes, not learn terms of art.
  3. If you’re working with a negotiator who feels that their situation can’t be “win-win” in a substantive sense, help that negotiator look for relationship gains instead. Almost all the negotiators I work with are facing strict budgets, targets, and deadlines. They aren’t in negotiation utopia (or at least they aren’t in a negotiation simulation). They are, however, negotiating with other people, and that in itself creates a whole world of possibilities. When it feels like someone’s going to have to “lose,” go back to the fact that all our models are firmly rooted in good communication and relationship-building skills. Digging one layer deeper into interests, spending five more minutes brainstorming with a counterpart, and even practicing active listening can make the difference between a negotiation that becomes a total walk-away or a negotiation that ends with “let’s talk again in a few weeks.” The tools we as negotiation experts can offer are extremely rich, even in a not-so-perfect world.

At the end of the day, a negotiation is simply a conversation where one person tries to persuade the other to do something. What we want as practitioners is to optimize those conversations for both parties by providing best practices that are grounded in sound theory but flexible enough to be applied to new challenges. At Vasher McRoberts, we’re pleased to be reinventing the applications of interest-based negotiation in many contexts, and we look forward to finding new ways to help our clients collaborate with their partners and negotiate higher-value deals.

Sandy Vasher ’07 is a Harvard Negotiation & Mediation Clinical Program alum, having participated in a project with the Fair Fund/DRU Campaign in the Clinic’s first year of existence. Sandy is a partner at Vasher McRoberts LLC, a consulting firm that provides customized training and consulting solutions focused on negotiation, communication, persuasion, and related concepts to client organizations and individuals. Find out more about Vasher McRoberts at www.vashmc.com or by following the firm on twitter @VasherMcRoberts. Sandy currently lives in the Atlanta metro area, and she is always up for conversation with a fellow negotiation enthusiast. You can find her on twitter @SandyVasher.  

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