Business at Oxford | Missing from ‘winner take all’ negotiations: trust

Business at Oxford | Missing from ‘winner take all’ negotiations: trust
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First Published: Mon, Oct 29 2007. 01 58 AM IST

Updated: Mon, Oct 29 2007. 01 58 AM IST
Years ago, a Hong Kong shopkeeper tricked me into buying a poor quality camcorder complete with an instruction manual in Japanese by adjusting the playback on the good model I had already paid for so that it looked as if the picture was much worse than the model he persuaded me to buy instead. I had researched cameras, compared prices and had a lengthy and, I thought, successful negotiation, but I fell victim to a classic bait and switch deceit. The shopkeeper knew that he would never see me again and couldn’t care less for his reputation, which would be unknown to all the visiting tourists who entered his shop.
The lesson from my Hong Kong experience is little more than caveat emptor, but most business negotiators should be able to do better than I did if they are careful, follow some rules, and think about the fundamental objective of serious negotiations. It is not simply to win as much as you can but to achieve a mutually beneficial outcome, which is impossible without a degree of trust. If negotiators trust too much, they make themselves vulnerable, but if they trust too little, they may miss good opportunities for mutual gain.
The concept of mutual gain is an important disincentive to deceive. Success at the negotiating table is all about determining the interests of both, or all, the players, valuing them, and then conceding what is of low cost in return for something of high value. Such valuations and reciprocity of concession and gain become impossible if the negotiators lie.
Most negotiations occur between parties who are likely to negotiate with each other again and who have friends or commercial associates in common, so dishonesty is remembered, and the dissembler’s unethical negotiation tactics will make it much more difficult to get the deal he wants next time. So, loss of reputation is the second major disincentive to being unethical.
Unfortunately, many people think the rules that govern commerce and society in general can be ignored when it comes to negotiation. Even the American Bar Association (ABA) acknowledges this. The ABA’s US Lawyers Model Rules of Professional Conduct 4.1 states that “An attorney shall not knowingly make a false statement of material fact or law to a third person” but, in a note appended to this rule, it says: “Whether a particular statement should be regarded as one of fact can depend on the circumstances. Under generally accepted conventions in negotiation, certain types of statements ordinarily are not taken as statements of material fact. Estimates of price or value placed on the subject of a transaction and a party’s intentions as to an acceptable settlement of a claim are in this category.”
Negotiators need to recognize that in many cultures, some degree of ritualistic haggling over prices and value is de rigueur and they may have to play the bargaining game. If a negotiator says, “I don’t believe it is worth that much and so I can only offer X amount”, he can still change his mind, but if he says: “My boss has only authorized me to offer X amount and I cannot contact him to authorize a higher figure”, he is proved to be a liar the moment he shifts his offer amount closer to that of the seller. So, words need to be chosen carefully.
Many popular unethical tactics will eventually be discovered by the “victim”. Puffery or exaggeration (this car gets 40 miles to the gallon when it only did so once—going downhill with the engine turned off) and non-disclosure (you will never tire of this gorgeous view from this house when you know that a prison is going to be built there within a couple of years of your selling the house) are two examples.
There are a number of measures negotiators can take to protect themselves against deception. All negotiations should be preceded by information-gathering; and if this is thorough, the negotiator will be well-armed to detect misleading statements by the other side. Chinese negotiators are famous for taking their foreign negotiating counterparts to the Great Wall and hosting endless banquets. Such a “getting to know each other” phase is sensible for any negotiator. If, when he is relaxing over dinner, your counterpart proudly tells you how successful he has been at avoiding paying his taxes, take it as a warning about his integrity.
Negotiators must not let down their guard and should keep doing their homework throughout the negotiation. Their antenna should be attuned to potential deceit. They should verify offers and claims by the other side and, if unsure, ask for them in writing.
Reciprocity, where a concession given can lead to a concession in return from the other side, is a key element of all negotiations. It is worth demonstrating your own trustworthiness to the other side as an indication that you expect the same in return.
Above all, the best negotiators recognize that their reputations are on the line if they are unethical and deceitful. The 17th century French diplomat François de Callières put it very well in his seminal handbook on negotiation, The Practice of Diplomacy: “It is a capital error, which prevails widely, that a clever negotiator must be a master of the art of deceit… a lie always leaves a drop of poison behind, and even the most dazzling diplomatic success gained by dishonesty stands on an insecure foundation, for it awakes in the defeated party a sense of aggravation, a desire for vengeance, and a hatred which must always be a menace to his foe… it is therefore in his interest to establish a reputation for plain and fair dealing”.
Send your comments to businessatoxford@livemint.com
Tim Cullen is an associate fellow of the Saïd Business School, University of Oxford, where he directs the Oxford Programme on Negotiation.
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First Published: Mon, Oct 29 2007. 01 58 AM IST