A dead end should not be an "indecent" word in negotiations.
More than seven years ago, the media reported that American toymaker Hasbro was in advanced negotiations to acquire DreamWorks Animation. The purchase would bring Hasbro closer to its goal of becoming a global entertainment giant. However, the news was not very well received in the stock markets. Just two days after the announcement of the negotiations, the company's shares fell 5%. Shareholders expressed concern that recent Dreamworks films have underperformed at the box office. Then the Walt Disney Company got involved in the process. Disney character and movie licenses accounted for approximately 30% of Hasbro's business. Just weeks before the merger plans were announced, Disney had switched its lucrative line of princesses from Mattel to Hasbro. Disney did not like that Hasbro wanted to merge with its main competitor, DreamWorks, and increased the pressure on Hasbro's negotiating team. So they broke off negotiations with DreamWorks. They did what many negotiators fight to avoid: left the negotiating table.
In both private and commercial negotiations, we strive to reach an agreement. Negotiation research and advice focus on recommendations that should help overcome differences, relax difficult positions and create harmonious conditions. That is, in measures that hopefully lead to a sustainable (commercial) relationship. Too consensual an attitude, however, risks ignoring the fact that some agreements just don't make sense. It is known that cooperations, mergers, etc. They have high failure rates. Sales contracts and employment contracts often end in disappointment for one or both parties.
Many businessmen know that it is wise to break off a negotiation if the deal turns out to be worse than the alternative (BATNA). Few, however, can assess the value of the potential deal in relation to their BAPAN. For this reason, negotiations often continue even though it is illogical (and wasteful) to continue.
Scientists at the Universities of Toronto, Northwestern and Carnegie Mellon have examined why it is so difficult to leave the negotiating table when a suboptimal deal is reached. They also found that employing a negotiating team would be an appropriate countermeasure.
Successful completion
There are a variety of reasons why a negotiator may be prone to falling into the "deal trap" (tendency to accept a deal that is less than the value of the alternative course of action, BATNA).
The person you are negotiating with knows how to hide the fact that the offer on the table is to your disadvantage. Let's say you're negotiating with a company and they suggest that you first run a free pilot project. The company does not have to pay you anything, but you agree to pay the entire consideration. I could accept it if I thought that after completing the pilot, paid follow-up orders could be expected and that this would be the beginning of a wonderful cooperation. This could be the case. But it is not necessary. If your counterparty doesn't make it clear that follow-on orders are very likely, ask. Otherwise, you're going to make an unfavorable deal because you made the wrong assumptions. Not only do you receive nothing, but you even pay more because you would be working without receiving anything in return.
One or both parties invested a lot of time, money, and energy into the deal during the course of negotiations. The phenomenon is called the fallacy of sunk costs or “commitment escalation”. You should never use resources already invested as a yardstick to decide whether to go ahead! They will be inclined to try to recover the "losses" suffered. That would be useless. Various investigations show that this effort is almost useless. To put it more bluntly, don't behave like a casino player who is "definitely" going to make up for his losses on the next game. This mental trap can be particularly damaging in competitive negotiations.
Negotiations often create a feeling of connection between parties. At some point you have the feeling that you have an obligation to the other party. This often happens in partnerships or long-term business relationships. The desire to continue the relationship or to be accepted/liked by the other party can prevent you from comparing the offer in front of you with your BATNA and realizing that it is time to leave the table.
It can also happen that people agree irrationally so as not to jeopardize your image as a successful negotiator. They want to avoid at all costs that their name is associated with a breakdown in the negotiations. The usual expressions "failing to reach an agreement" or "negotiations failed" are often interpreted by our social environment as human weakness.
Negotiate benefits as a team
You may be able to avoid the deal trap by negotiating as part of a team. The scientists discovered this in two experiments. In one of the experiments, more than 1,000 MBA students participated in a simulated negotiation between a seller and a buyer of a property. The case was designed in such a way that the interests of both parties were incompatible. Not reaching an agreement and walking away from the negotiating table would have been the best course of action for both the buyer and the seller. The students negotiated in different pairs (1:1, 2:2 or 3:3). Teams (compared to individual negotiators) decided much more often to break the negotiation, that is, to make the most rational decision. There were no differences between teams of two and three. The second experiment showed that the groups show better judgment and thus avoid the agreement trap.
In complex negotiations with a flood of information to process, teams are more effective than individual negotiators, especially when it comes to reaching mutually beneficial agreements. Teams ask more questions and are more accurate in assessing the interests, preferences, and priorities of their trading partners. In teams, the risk of reaching a suboptimal deal just for the sake of the relationship is also lower, since the relationships within the team members take precedence over the relationships with the other person. However, individual negotiators do better on certain (competitive) success criteria.
The Dead End Attitude
Four tips can help you avoid the deal trap and overcome the fear of being stuck in a negotiation impasse:
Don't negotiate alone. Since two (or more) heads can outthink one in a negotiation, bring along a trusted colleague or coach. So when it comes time to decide whether or not to go through with the deal, one of you could take on the role of devil's advocate.
Always be aware of your alternative (BATNA). In the heat of the moment, your alternative actions are often forgotten. Therefore, it is important to compare the current bargain offer with your BATNA. And since BATNAs fluctuate, you should always keep an eye on them and work to strengthen them and make them as attractive as possible to you.
Ignore the sunk cost fallacy. No matter how many resources you have invested in the negotiation up to that point, it doesn't matter. Don't accept a proposal just because you've invested a lot in it so far.
Change your attitude toward "the dead end. Don't equate walking away with failure. Require your negotiators to keep track of your BATNA and consult with them before reaching an agreement. Evaluate and reward your negotiators based on the quality of their decision-making process, not solely based on completion rate.
Risks of negotiating as a team
However, there are also some disadvantages to negotiating as a team. For one thing, teams are much more selfish than individuals and tend to want to deceive the trading partner. Groups tend to be very loyal to their own team members, causing them to devalue the needs of the other negotiating group and treat them unfairly. Furthermore, bargaining teams have a much lower level of trust than individuals. They are much more skeptical about the other party's motives than individual negotiators. These results suggest that teams should make additional efforts to build trust with the opposing party before engaging in complex negotiations. A higher level of trust is associated with greater equity and a greater willingness to improve outcomes for all through collaboration.
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