A quick word first1
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How pressure tactics can backfire
Richard Zeckhauser of Harvard’s Kennedy School has had a long and distinguished career specializing in strategy and decision making. (There’s a brand-new book just out about his work, Maxims for Thinking Analytically.)
Richard was precocious even in college, where he designed a clever game demonstrating how time pressure can impact negotiations. In Group A, pairs of subjects had to divide some money. If the two people couldn’t agree on the split, no one would get anything. Most pairs came to agreement, many splitting the money fifty-fifty, though often only after extended haggling.
Richard then gave another set of paired subjects—Group B—the same amount to divide, but he told them that prize would shrink with every tick of the clock. Because time literally was money, these people reached agreement quickly, almost always splitting the prize equally.
With Group C, Richard added a devilish twist. Again there was a tax that grew bigger with time, but here he specified that one person would pay most of the penalty. As you might guess, the people who were more heavily taxed usually got a smaller share. The surprise was that untaxed parties often did poorly too.
Why? Because these subjects overplayed their hand. Believing that time was on their side, they expected their counterparts to buckle given the ever-mounting tax. Instead, many people in that weaker position held out, biting their own noses to spite those who were pressuring them. By the time they reached agreement, the pie had shrunk significantly, resulting in less for both sides.
People fall into the same kind of trap in real-world negotiations. In business transactions, each side may be hesitant to make a concession to close a deal, fearful that they will look weak. And as we saw in the $902 window bar article earlier this week, if both sides are committed to outlasting the other, the monetary and relational costs can be colossal.
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Photo by Jakob Owens on Unsplash.
Being strategic when making concessions is imperative for negotiators. Expert negotiators make calculated concessions to their adversaries and are always on the lookout for opportunities to ensure better outcomes for both parties. But a lot of negotiators forget to consider the importance of continuing to negotiate after coming to an agreement. Most integrative negotiation scenarios rely on relationship building. By strategically addressing concessions thought-out well in advance, you can build goodwill and leverage long after coming to an agreement. Continuing to negotiate will bolster your negotiator efforts well into the future.
Here's a link to a recent PON article addressing this: https://www.pon.harvard.edu/daily/dealmaking-daily/enhancing-your-deal-in-business-negotiations/?utm_source=WhatCountsEmail&utm_medium=daily&utm_date=2021-07-27-06-30-00&mqsc=E4134402