Stab in the back, betrayal, disloyalty. That is something that we're all afraid of. Unfortunately it may happen during the group negotiations. Not because of the bad will, but rather the fact, that not everybody can endure the pressure of two parties at once.
We had to negotiate against two other parties with my teammate We had some agreements, knew our tactics and approach. Armed with our positive attitude, calculations and negotiation checklist we started the discussion.
I quickly realized that "other principal" was not so aggressive and competitive (even dough we've agreed to do it), but is rather calm and doesn't talk at all. The other two parties formed some kind of coalition, cause they had mutual objectives (new heating system) and could compromise on other, less important issues. We, on the other hand, wanted to build a new pool for the school, but we kindly got into crossfire.
The psychological situation looked more or less like that: 4 people against me and 1 neutral (my teammate). I thought that I have to do something with that, but I didn't really know what actually. I thought that I really need a helping hand there, so I asked my teammate to speak...
I regretted that as soon, as I said it, cause he agreed to our opponents demands. It was totally against our case study objectives, so I thought that I was alone.
It is very hard to think about it, even though it was just a classroom negotiation, cause the feel of being backstabbed is not nice. I know that he didn't mean anything wrong. I am not trying to accuse him, but still it was a very weird feeling. I would describe it as anxiety, cause you loose something that you two agreed to.
However, in such situations you usually come up with different and unconventional solutions. Luckily, everyone wanted to have a good feeling after the negotiation, so they really wanted to give me at least something to cheer up. I couldn't not seize my opportunity, so I proposed that we will do everything other except those two major investments (pool or heating system). This outside the box solution was actually well welcomed and all parties agreed to that.
There are some obvious pros of negotiating in the group, but not when you are alone. I really like "the good and the bad cop" tactic, cause it makes the opponent a little confused. But it won't work when there is only one cop, right?
Negotiating in pairs may work only if you really know each other and think in the same way. Once, I had a friend with whom I was attending meetings. We had some projects to do in Student Government, so we needed partners. We usually went on those meetings together and that was very effective. I think it's all about mutual relationship and similar mindset.
Nevertheless, I hope I won't get into this situation ever again.
niedziela, 29 listopada 2015
poniedziałek, 23 listopada 2015
Irrationality in negotiations
I was really happy that we managed to talk a little about rational/ irrational behavior on the last classes. First of all, it was interesting and secondly, I'm a big fan of behavioral economics, which deals with that matter. There are many things, that can be used in negotiation, but I will describe those 5, that are actually useful for me.
1. Anchoring effect
It is widely known, that people tend to be biased by random numbers and those can actually affect their perspective and rationality. Man can easily use anchoring. It is very effective, especially in bargaining. It is easy to anchor higher price when saying the initial price. Just make it slightly higher, than it should have been. Remember the famous Liebeck vs McDonald's lawsuit? Lawyers who represented Mrs Liebeck were able to get a great deal only because they started from the extremely high anchor. Case study is well described in the book "Priceless" (W. Poundstone) or in this link: http://www.lectlaw.com/files/cur78.htm
2. Endowment effect
"Do you want to give it a ride?". If you have bought a car at least once in your life, you had probably heard it. Used car dealers intuitively know the power of endowment effect. Multiple research showed that people value things more they actually own or... even hold in their hands. If you drive a car, you instantly think about it as yours, so you're more willing to buy it.
3. Loss aversion
People hate when they have to give something back, even if they're not using it. Imagine kids, who have to give their Lego blocks to younger cousins or Americans who don't have guns, but removing the 2nd amendment would make them riot. If you own something (endowment effect), you don't not only value it more, but also feel bad about giving it back. In negotiations, people feel uncomfortable when they have to compromise and give something they agreed to before. It is good to remember about it.
4. Paradox of choice
Barry Schwartz perfectly described this phenomenon in his book titled as the headline above. Imagine the situation where you're going to buy a pair of jeans. You want to buy them in the same way you used to several years ago. But then the shopkeeper asks you, cause maybe you want slim fit, regular, baggy or in a different type. I don't even have to mention the color. When there are many options and we have to choose only one, we feel bad, cause our alternative costs (costs of not choosing the other options) increase and that distinctly diminishes our utility - which is satisfaction in this particular case. It is good to frame the possible options in limited ways. Just give 2 or 3 options - your client will feel more comfortable. Schwartz described it here: https://www.youtube.com/watch?v=VO6XEQIsCoM
5. Will to take the default option
Do you remember the last time when have you been installing something on your computer or registering into new internet shop? You probably just check everything what was needed, clicked OK and didn't bother. It's pretty much the same with written agreement - many people don't read them anyway. Presenting the deal like the default option may actually be a good idea. "If you don't agree, please sign here" or "If you don't want us to send you some additional things, please write us a special letter, which..." Sometimes picking up the pen is treated like a cost. Stupid, I know, but that's how it works. Ariely described it here: https://www.ted.com/talks/dan_ariely_asks_are_we_in_control_of_our_own_decisions
Even United Kingdom's government used some default option stuff in their administrational policy. They even hired Richard Thaler, one of the inventors of behavioral economics.
To be successful in business we need to constantly think about our limitations as humans. After all, we're not homo oeconomicus, but homo sapiens, so we can be fooled all the time, by heuristics, biases, incentives around us. It is better to think that we're irrational - it's easier that way.
1. Anchoring effect
It is widely known, that people tend to be biased by random numbers and those can actually affect their perspective and rationality. Man can easily use anchoring. It is very effective, especially in bargaining. It is easy to anchor higher price when saying the initial price. Just make it slightly higher, than it should have been. Remember the famous Liebeck vs McDonald's lawsuit? Lawyers who represented Mrs Liebeck were able to get a great deal only because they started from the extremely high anchor. Case study is well described in the book "Priceless" (W. Poundstone) or in this link: http://www.lectlaw.com/files/cur78.htm
2. Endowment effect
"Do you want to give it a ride?". If you have bought a car at least once in your life, you had probably heard it. Used car dealers intuitively know the power of endowment effect. Multiple research showed that people value things more they actually own or... even hold in their hands. If you drive a car, you instantly think about it as yours, so you're more willing to buy it.
3. Loss aversion
People hate when they have to give something back, even if they're not using it. Imagine kids, who have to give their Lego blocks to younger cousins or Americans who don't have guns, but removing the 2nd amendment would make them riot. If you own something (endowment effect), you don't not only value it more, but also feel bad about giving it back. In negotiations, people feel uncomfortable when they have to compromise and give something they agreed to before. It is good to remember about it.
4. Paradox of choice
Barry Schwartz perfectly described this phenomenon in his book titled as the headline above. Imagine the situation where you're going to buy a pair of jeans. You want to buy them in the same way you used to several years ago. But then the shopkeeper asks you, cause maybe you want slim fit, regular, baggy or in a different type. I don't even have to mention the color. When there are many options and we have to choose only one, we feel bad, cause our alternative costs (costs of not choosing the other options) increase and that distinctly diminishes our utility - which is satisfaction in this particular case. It is good to frame the possible options in limited ways. Just give 2 or 3 options - your client will feel more comfortable. Schwartz described it here: https://www.youtube.com/watch?v=VO6XEQIsCoM
5. Will to take the default option
Do you remember the last time when have you been installing something on your computer or registering into new internet shop? You probably just check everything what was needed, clicked OK and didn't bother. It's pretty much the same with written agreement - many people don't read them anyway. Presenting the deal like the default option may actually be a good idea. "If you don't agree, please sign here" or "If you don't want us to send you some additional things, please write us a special letter, which..." Sometimes picking up the pen is treated like a cost. Stupid, I know, but that's how it works. Ariely described it here: https://www.ted.com/talks/dan_ariely_asks_are_we_in_control_of_our_own_decisions
Even United Kingdom's government used some default option stuff in their administrational policy. They even hired Richard Thaler, one of the inventors of behavioral economics.
To be successful in business we need to constantly think about our limitations as humans. After all, we're not homo oeconomicus, but homo sapiens, so we can be fooled all the time, by heuristics, biases, incentives around us. It is better to think that we're irrational - it's easier that way.
niedziela, 15 listopada 2015
Group negotiations
Take a tree branch and try to break it. You'll probably do it without any effort. But take more of them and it's not an easy task anymore. Groups were always stronger, than solitary units. Our ancestors did it and it's no difference in negotiations.
What I saw during our group negotiations during classes, was the initial feeling that I should find somebody who is similar to me. It wasn't only about the common interests we're supposed to share, but also the negotiation style or even the way we speak and behave. Humans are willing to have relationships with people who are like them and that's the fact. From the very beginning I wanted to cooperate with somebody, who was willing to do so.
I found it during Jordan Electronics negotiations, when Zack and I quickly realized that we have common goal and also the aggressive way of negotiating. Me and him started to draw some kind of charts, to come up with imaginary numbers and behave that we're actually professional and know more than our opponents. Then we decided to find somebody, who shared at least some of our thoughts and that was Rafal. With leader girl (I forgot her name, sorry) who wasn't definitely comfortable with her role we quickly imposed our way and solution. Justin was just condemned to loose this battle.
On the other hand, during Florist - Bakery - Grocery negotiations I tried to cooperate against Kuba, but my potential ally didn't catch a bite, cause I wanted to go there totally competitive. However, we started to push Kuba into corner a little, cause we've found that we need the same things. When Kuba realized what is happening, he tried to blow up the whole negotiations. It was a very aggressive and dangerous strategy. More like walking on the thin line, than having a mutual agreement, which is good for everybody.
Eventually, we came up with the "even" agreement and met in the middle. I wasn't fine with that, cause this equality felt like a failure for me. The goal was to "get as much point as I could". Everybody got 300 or something like that, so it was an optimal decision for the whole group, yet not so good for me personally.
I couldn't be on the last negotiation classes, so I can't really describe my feelings about those group conversations, yet I also have a thought, which I found when writing the paper for tomorrow's classes.
I realized, that when you're in the group, it's easier to make the final offer, which is like "take it or leave it". Being in the group gives you this kind of power: "who is not with us, is against us". I think that is also how the mob works. You just sometimes know, that you can do it, so you use your advantage. It is actually sociologically possible, cause everyone doesn't want to be excluded from the social group. If there are 3 people saying something and there is only you against them - probably you will bend. It's just easier to go with the flow, which is kindly sad, cause I see how much we can be influenced. Even if it leads to stupid decisions.
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