The Mind and Heart of the Negotiator
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Fifth Edition The Mind and Heart of the Negotiator Leigh L. Thompson Kellogg School of Management Northwestern University Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montréal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Editorial Director: Sally Yagan Acquisitions Editor: Brian Mickelson Director of Editorial Services: Ashley Santora Editorial Assistant: Carter Anderson Director of Marketing: Maggie Moylan Senior Marketing Manager: Nikki Ayana Jones Marketing Assistant: Ian Gold Senior Managing Editor: Judy Leale Supervisor/Sr. Production Project Manager: Lynn Savino Wendel Senior Operations Supervisor: Arnold Vila Operations Specialist: Cathleen Petersen Creative Director: Jayne Conte Cover Designer: Bruce Kenselaar Cover Illustration/Photo: Robert Weeks Full-Service Project Management and Composition: Integra Printer/Binder: STP Courier Cover Printer: STP Courier Text Font: 10/12 Times Ten Roman Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on appropriate page in text. Copyright © 2012, 2009, 2005, 2001 Pearson Education, Inc., publishing as Prentice Hall. All rights reserved. Manufactured in the United States of America. This publication is protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. To obtain permission(s) to use material from this work, please submit a written request to Pearson Education, Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey 07458 or you may fax your request to 201-236-3290. Library of Congress Cataloging-in-Publication Data Thompson, Leigh L. The mind and heart of the negotiator / Leigh L. Thompson. — 5th ed. p. cm. ISBN-13: 978-0-13-254386-6 ISBN-10: 0-13-254386-9 1. Negotiation in business. 2. Negotiation. I. Title. HD58.6.T478 2012 658.4'052—dc22 2011014992 10 9 8 7 6 5 4 3 2 1 ISBN 10: 0-13-254386-9 ISBN 13: 978-0-13-254386-6 To the loves of my life: Bob, Sam, Ray, and Anna BRIEF CONTENTS PART I Essentials of Negotiation 1 Chapter 1 Negotiation: The Mind and The Heart 1 Chapter 2 Preparation: What to Do Before Negotiation 12 Chapter 3 Distributive Negotiation: Slicing the Pie 38 Chapter 4 Win-Win Negotiation: Expanding the Pie 69 PART II Advanced Negotiation Skills 92 Chapter 5 Developing a Negotiating Style 92 Chapter 6 Establishing Trust and Building a Relationship 125 Chapter 7 Power, Persuasion, and Ethics 153 Chapter 8 Creativity and Problem Solving in Negotiations 179 PART III Applications and Special Scenarios 215 Chapter 9 Multiple Parties, Coalitions, and Teams 215 Chapter 10 Cross-Cultural Negotiation 252 Chapter 11 Tacit Negotiations and Social Dilemmas 285 Chapter 12 Negotiating Via Information Technology 312 APPENDICES Appendix 1 Are You a Rational Person? Check Yourself 329 Appendix 2 Nonverbal Communication and Lie Detection 351 Appendix 3 Third-Party Intervention 361 Appendix 4 Negotiating a Job Offer 370 iv CONTENTS Preface xvii Overview xix Part I Essentials of Negotiation 1 Chapter 1 NEGOTIATION: THE MIND AND THE HEART 1 Negotiation: Definition and Scope 2 Negotiation as a Core Management Competency 3 Dynamic Nature of Business 3 Interdependence 3 Economic Forces 4 Information Technology 4 Globalization 4 Most People Are Ineffective Negotiators 5 Negotiation Traps 5 Why People Are Ineffective Negotiators 6 Egocentrism 6 Confirmation Bias 6 Satisficing 7 Self-Reinforcing Incompetence 7 Debunking Negotiation Myths 8 Myth 1: Negotiations Are Fixed-Sum 8 Myth 2: You Need to Be Either Tough or Soft 8 Myth 3: Good Negotiators Are Born 8 Myth 4: Life Experience Is a Great Teacher 9 Myth 5: Good Negotiators Take Risks 9 Myth 6: Good Negotiators Rely on Intuition 9 Learning Objectives 10 The Mind and Heart 11 Chapter 2 PREPARATION: WHAT TO DO BEFORE NEGOTIATION 12 Self-Assessment 13 What Do I Want? 14 What Is My Alternative to Reaching Agreement in This Situation? 15 Determine Your Reservation Point 16 v vi Contents Be Aware of Focal Points 19 Beware of Sunk Costs 19 Do Not Confuse the Target Point with Your Reservation Point 19 Identify the Issues in the Negotiation 19 Identify the Alternatives for Each Issue 20 Identify Equivalent Multi-Issue Proposals 20 Assess Your Risk Propensity 20 Endowment Effects 23 Am I Going to Regret This? 24 Violations of the Sure Thing Principle 25 Do I Have an Appropriate Level of Confidence? 26 Sizing Up the Other Party 26 Who Are the Other Parties? 27 Are the Parties Monolithic? 27 Counterparties’ Interests and Position 27 Counterparties’ BATNAs 27 Situation Assessment 28 Is the Negotiation One Shot, Long Term, or Repetitive? 28 Do the Negotiations Involve Scarce Resources, Ideologies, or Both? 28 Is the Negotiation One of Necessity or Opportunity? 29 Is the Negotiation a Transaction or Dispute Situation? 30 Are Linkage Effects Present? 30 Is Agreement Required? 30 Is It Legal to Negotiate? 31 Is Ratification Required? 32 Are Time Constraints or Other Time-Related Costs Involved? 32 Are Contracts Official or Unofficial? 34 Where Do the Negotiations Take Place? 34 Are Negotiations Public or Private? 34 Is Third-Party Intervention a Possibility? 35 What Conventions Guide the Process of Negotiation (Such as Who Makes the First Offer)? 35 Do Negotiations Involve More Than One Offer? 35 Do Negotiators Communicate Explicitly or Tacitly? 36 Is There a Power Differential Between Parties? 36 Is Precedent Important? 36 Conclusion 36 Contents vii Chapter 3 DISTRIBUTIVE NEGOTIATION: SLICING THE PIE 38 The Bargaining Zone 39 Bargaining Surplus 41 Negotiator’s Surplus 41 Pie-Slicing Strategies 42 Strategy 1: Assess Your BATNA and Improve It 43 Strategy 2: Determine Your Reservation Point, but Do Not Reveal It 43 Strategy 3: Research the Other Party’s BATNA and Estimate Their Reservation Point 44 Strategy 4: Set High Aspirations (Be Realistic but Optimistic) 44 Strategy 5: Make the First Offer (If You Are Prepared) 46 Strategy 6: Immediately Reanchor if the Other Party Opens First 47 Strategy 7: Plan Your Concessions 47 Strategy 8: Support Your Offer with Facts 49 Strategy 9: Appeal to Norms of Fairness 49 Strategy 10: Do Not Fall for the “Even Split” Ploy 50 The Most Commonly Asked Questions 50 Should I Reveal My Reservation Point? 50 Should I Lie About My Reservation Point? 50 Should I Try to Manipulate the Counterparty’s Reservation Point? 52 Should I Make a “Final Offer” or Commit to a Position? 52 Saving Face 52 The Power of Fairness 53 Multiple Methods of Fair Division 54 Situation-Specific Rules of Fairness 54 Social Comparison 56 The Equity Principle 58 Restoring Equity 59 Procedural Justice 60 Fairness in Relationships 62 Egocentrism 62 Wise Pie-Slicing 66 Consistency 67 Simplicity 67 Effectiveness 67 viii Contents Justifiability 67 Consensus 67 Generalizability 67 Satisfaction 68 Conclusion 68 Chapter 4 WIN-WIN NEGOTIATION: EXPANDING THE PIE 69 What Is Win-Win Negotiation? 70 Telltale Signs Of Win-Win Potential 70 Does the Negotiation Contain More Than One Issue? 70 Can Other Issues Be Brought In? 71 Can Side Deals Be Made? 71 Do Parties Have Different Preferences Across Negotiation Issues? 71 A Pyramid Model 72 Most Common Pie-Expanding Errors 73 False Conflict 73 Fixed-Pie Perception 74 Strategies That Do Not Really Work 75 Commitment to Reaching a Win-Win Deal 75 Compromise 75 Focusing on a Long-Term Relationship 75 Adopting a Cooperative Orientation 75 Taking Extra Time to Negotiate 75 Effective Pie-Expanding Strategies 76 Perspective-Taking 76 Ask Questions About Interests and Priorities 77 Provide Information About Your Interests and Priorities 79 Unbundle the Issues 81 Make Package Deals, Not Single-Issue Offers 81 Make Multiple Offers of Equivalent Value Simultaneously 82 Structure Contingency Contracts by Capitalizing on Differences 85 Presettlement Settlements (PreSS) 87 Search for Postsettlement Settlements 87 A Strategic Framework for Reaching Integrative Agreements 88 Resource Assessment 88 Assessment of Differences 89 Contents ix Offers and Trade-Offs 90 Acceptance/Rejection Decision 90 Prolonging Negotiation and Renegotiation 90 Do Not Forget About Claiming 90 Conclusion 91 Part II Advanced Negotiation Skills 92 Chapter 5 DEVELOPING A NEGOTIATING STYLE 92 Motivational Orientation 94 Assessing Your Motivational Style 95 Strategic Issues Concerning Motivational Style 98 Interests, Rights, and Power Model of Disputing 102 Assessing Your Approach 104 Strategic Issues Concerning Approaches 108 Emotions and Emotional Knowledge 114 Emotions and Moods 114 Expressed Versus Felt Emotion 115 Genuine Versus Strategic Emotion 116 Negative Emotion 118 Emotional Intelligence 119 Positive Emotion 120 Emotional Intelligence and Negotiated Outcomes 121 Strategic Advice for Dealing with Emotions at the Table 122 Conclusion 124 Chapter 6 ESTABLISHING TRUST AND BUILDING A RELATIONSHIP 125 The People Side of Win-Win 126 Trust as the Bedrock of Relationships 128 Three Types of Trust in Relationships 128 Building Trust: Rational and Deliberate Mechanisms 131 Building Trust: Psychological Strategies 134 What Leads to Mistrust? 138 Repairing Broken Trust 139 Reputation 142 Relationships in Negotiation 143 Negotiating with Friends 145 x Contents Negotiating with Businesspeople 148 When in Business with Friends and Family 150 Conclusion 151 Chapter