Most of us think we know what matters most to the other party before we even sit down to negotiate, and that getting what we want comes at the expense of others. Based on these assumptions, the value we create for ourselves and other parties involved are rarely what they could be.
But by better understanding decision behavior, we get a little closer to the ideal scenario for all parties. Below are six things you’re likely doing wrong in negotiations:
1. Not making the first offer (when it’s beneficial to do so)
The ultimate negotiator’s dilemma: Should you or shouldn’t you make the first offer? Conventional wisdom tells us that the person making the first offer is put in a vulnerable position. By revealing knowledge, their counterpart now knows information that could give them a leg up at the bargaining table.
However, overwhelming research reveals that the first offer greatly influences the rest of the negotiation, especially if what’s being negotiated has an uncertain or ambiguous value. Based on what’s called the “anchoring principle,” there is a strong correlation between the first offer, what the other party counteroffers, and hence, final results. One particular study tested whether the anchoring principle would influence real estate agents who are trained to estimate property values. The researchers from the University of Arizona found that all of the agents included in the study were impacted by the list price, despite denying that the number had any effect on their final decision.
When you have a lot of market information, then introducing the first number makes a lot of sense, explains Jared Curhan, a professor at Massachusetts Institute of Technology’s Sloan School of Management, who teaches a two-day negotiation for executives course. “Otherwise, it’s unwise to do so,” he says.
One way that you could use the anchoring principle to your advantage without actually making the first offer is by mentioning something of similar value. For example, if you’re selling a home, differentiate the anchor and the offer by saying: “Another home I saw that’s similar to this is priced as X.”
2. Focusing too much on ideal outcomes
Since 90% of negotiations is in the planning, according to Curhan, those who prepare effectively have identified their BATNA (best alternative to a negotiated offer) and reservation value or number, which is your walk-away point. However, we often anchor these numbers so deeply into our brains that we end up rejecting more profitable offers in the process. It is also beneficial, during the planning process, to try to determine the other party’s BATNA and reservation value or number so you can come to a “zone of possible agreement,” which is somewhere between the buyer’s and seller’s reservation values.
3. Accepting the other party’s first offer too quickly
Even when the other party’s first offer is close to what you want, accepting it immediately will likely decrease their satisfaction in working with you. Research tells us “if only” counterfactual thinking increases when our first offer is accepted too quickly. And how we feel–the subjective value–after a negotiation is more important than what we got from the negotiation, or the objective or economic value.
Research also tells us that a positive subjective value means a higher chance of the person satisfying the agreement in full in the long term. This study conducted by researchers from MIT and the University of California, Berkeley found that in the world of job offers, “Economic outcomes had no significant effect on the subsequent job attitudes of employees—by contrast with [subjective value].” In other words, how much they’re paying you matters less than whether you feel appreciated and respected when you walk away from the interaction.
4. Using the same tactics in both short-term and long-term negotiations
The difference between a long- and short-term relationship is that in the long term, you need the other party to succeed so that you can succeed, Curhan says. What this means is that rational behavior in the short term is considered irrational in long-term negotiations.
For instance, we know from the game theory prisoner’s dilemma that it doesn’t make sense for people to act against their own self-interest. In fact, the faster they act in their own self-interest, the better off they’ll be, as whoever acts first gets the greater advantage. However, even if it’s in your best interest to always choose Option A, but hurts you greatly for your opponent to also choose Option A, then in long-term negotiations, your strategy might be to prevent your opponent from choosing A. And sometimes one way to encourage that behavior is to not choose A yourself.
5. Judging others based on their actions
A lot of the first interaction, or round of a negotiation, is sizing up the other party. However, what’s known as “fundamental attributes” comes from the idea that we judge ourselves based on the situation that we’re in, but we judge others based on what they do. This affects negotiations, because judging others this way can prevent us from properly creating value for the other party, which, in turn, can help us get what we want.
For instance, if you ask your boss for a salary raise and she says “no” despite your persuasive evidence that you deserve a raise, you might immediately think of her as a jerk. But, digging into the why behind her “no,” or the situation that might result in her “no” might help you get that raise. For instance, who does your boss answer to? Could budget constraints be preventing your raise? By understanding the situation that your boss is in and satisfying all potential parties–even the ones not sitting at the bargaining table–you have the opportunity to get to the “yes” you want.
6. Assuming you know what’s most valuable to the other party
Another common reasoning in negotiations is thinking that your counterpart doesn’t want what you want, or that your winning can only come at their expense. Assumptions like this affect attitudes and change how people approach negotiations, says Curhan. For instance, you might assume in a job-offer negotiation that the other party wants a higher salary when, while money is valuable, it might not be as valuable as other factors. Only through clear and trustworthy communication can you determine what the other party’s preferences really are, says Curhan, and learning this might not cost you as much as you originally thought. One way to do this is through a trial and error process where you bundle different options across multiple issues, then compare what the counter party prefers. Based on their responses, you can determine what they may value most.