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Organization Studies
ORGS 4560
Chris Bell

ORGS 4560 notes Class Notes  Asymmetry of market  Problem of trust  ZOPA – Zone of Potential Agreement  Emotions in Negotiation: How to Manage Fear and Anger Adler, R. S., Rosen, B. and Silverstein, E. M. (1998), Emotions in Negotiation: How to Manage Fear and Anger. Negotiation Journal, 14: 161–179. doi: 10.1111/j.1571-9979.1998.tb00156.x  Intense emotions often trigger intense and, at times, irrational behaviour o Ex. The Dollar Auction  People big on a dollar. Winner gets the dollar, and the 2 highest bidder must still pay their bid  Often enough, the bid goes much higher than the prize of the dollar  In the end, in the spirit of winning, usually the winner of the bid looks as upset as the loser  Anger and a reluctance to “lose face” overwhelm rational faculties during the auction  The key to a successful deal lies not in technical details or in a favorable price, but in the proper treatment of the emotions that drive the parties to a negotiation o Numerous commentators have noted and deplored that emotions are one of the least studied areas in the field o Those who analyze negotiations only from a cognitive or economic perspective overly “sanitize” the process by eliminating emotions and their potentially strong effects EMOTIONS:AD EFINITION  At some level, one must simply feel in order to experience an emotion because words cannot capture the sensation  At their most basis, emotions are simply “impulses to act, the instant plan for handling life that evolution has installed in us” o Also feelings that trigger the impulse to act o Emotions intertwine with rational thought to make us human EMOTIONS:A NEVOLUTIONARY LEGACY  Emotions play a central and at times, dominant role in our lives for good reasons  The survival value of our emotional repertoire was attested to by its becoming imprinted in out nerves as innate, automatic tendencies of the human heart  It seems likely that evolutionary dynamics have developed out “negative” emotions to engage more quickly and with greater force than our “positive” emotions because the former carry greater survival potential PHYSICALASPECTS OFEMOTIONS  We feel a variety of thing during these amygdala-driven situations o We feel the exhilaration of the moment, often inspiring us to achievements beyond out normal capabilities  Why coaches work so hard at conditioning their teams’ minds as well as their bodies  The strain of an intense emotional experience can lead to trembling, stomach upset, and oppressive tensions  What is critical to understanding the role of emotion is that the amygdala engages immediately at a primitive and powerful level before the rational mind assesses a situation and decides how to react POSITIVE ANDNEGATIVEASPECTS OFEMOTIONS INN EGOTIATIONS  Those who would eliminate emotions in negotiation wrongly focus only on the negatives o Missing the crucial nature of emotion  Emotions are what give vitality to the values and goals that negotiators bring to the table  If we do not care about what we seek, we become indifferent, and therefore ineffective, bargainers o Emotions give us out values and motivate us to pursue them  Because we realize that the other side may scrutinize us for signs of fear or excessive eagerness, we try to subdue the outward manifestation of these feelings so we will not be take advantage of o Maintain a “poker face” despite inner quakes o However, extravagant displays of anger or irrational outburst can sometimes be effective in breaking an impasse or intimidating an opponent ANGER INN EGOTIATIONS  When we become truly furious we may act in an utterly irrational way for a period of time  Queen Elizabeth I – “anger makes dull men witty, but it also keeps them poor”  Anger motivates us to retaliate when we are attacked and to defend ourselves against those whom we believe are doing us harm  Anger often injects a sour note in proceedings, impeding agreement o It clouds out objectivity because we lose trust in the other side o It narrows out focus form broader topics to the anger-producing behaviour o It misdirects out goals from reaching agreement to retaliating against the offender DEALINGW ITHYOUR ANGER  The first step necessary in controlling anger is self-awareness  Determine situations that trigger inappropriate anger  Decide whether to display anger  “freeze frame” – thinking of a pleasant experience to focus on calming down  Express anger and disappointment effectively  Avoid “negotiator’s bias” o Viewing yourself as honest and fair, and opponent who is unknown as hostile  Try to promote trust o If negotiators cannot trust each other, then every issue requires verification and each agreement necessitates iron-clad guarantees DEALINGW ITHYOUR OPPONENT SA NGER  Defuse heated emotional buildups  Asses the significance of angry displays  Address an opponent’s anger  Respond to anger in strategic ways  Help an angry opponent save face  Involve a mediator when you anticipate anger FEARINN EGOTIATION  Fear is a pivotal emotion o At extreme levels, fear mobilizes all of the body’s resources to escape physical harm o At lesser intensities, it leads us to worry about looming problems or pending concerns  “Fear of fear” – sweaty palms, shaky legs, queasy stomach, thumping heartbeat, etc. o Can be particularly debilitating because those who suffer it will seek to avoid stressful situations DEALINGW ITHYOUR FEAR  Know your warning signs  Understand that fear is often a normal reaction o Key is to channel the feelings into effective responses and to minimize the disruptive effects of fear  Determine how visibly you display fear  Determine situations that trigger fear  Careful preparation reduces fear  Act confident even if you do not feel so  Avoid quick agreements motivated by fear  Try to reduce your stress level DEALINGW ITHY OUR OPPONENT S FEAR  Monitor all negotiations for emotional buildups  Show flexibility in how you react to your opponent’s fear  Where helpful, share your fears and anxieties with your opponent  Help your fearful opponent save face Bargaining with the Devil without Losing Your Soul: Ethics in Negotiation THEC OREETHICALPROBLEM FOR N EGOTIATORS  People say all kinds of things to position their demands when they are buying and selling  Lies are indisputably a feature of everyday social life in every culture  Students were quite comfortable with traditional competitive bargaining tactics o Bluffing about bottom lines, opening demands, time constraints and other offers o Even approved promising (contrary to their real intent) that a future relationship would develop in return for concrete concessions  “cooperative” negotiators, a scrupulous desire to “conduct oneself ethically,” do not see bargaining as a game and generally do not think of lies as legitimate moves in the process  Perhaps most compelling, isn’t lying a habit that can become addictive if use regularly?  A measurable portion of a person’s success may depend on using lies o Truth telling becomes an optional, expensive luxury  “the negotiators role is at least passively to mislead his opponent about his settling point while at the same time to engage in ethical behavior o Statement embodies the contradiction many people encounter when they start thinking about bargaining technics Ethics Come First, Not Last  Ethics are a vital part of your identity as a person and you will never be able to successfully separate the way you act in negotiations from the person you are in other parts of your life  The stricter your ethical standard, the higher the cost you must be willing to pay to uphold them in any given transaction  The lower your ethical standards, the higher the price may be in terms of your reputation  The lower the standards of those with whom you deal, the more time, energy, and prudence are required to defend yourself and your interests  Negotiators who value “personal integrity” can be counted on to “negotiate consistently, using a thoughtful set of personal values that they could, if necessary, explain and defend to others” The Minimum Standard: Obey the Law  Regardless of how you feel about ethics, everyone has a duty to obey the laws that regulate the negotiation process  “In a business transaction both sides presumably try to get the best deal … The proper recourse [for outrageous conduct] is to walk away from the bargaining table, not sure for ‘bad faith’ in negotiations” o This assumes that no one has committed fraud  There are six major element of a fraud case o A bargaining move is fraudulent when a speaker makes a (1) knowing (2) misrepresentation of a (3) material (4) fact (5) on which the victim reasonably relies (6) causing damages  We would all prefer to see clear black and white rules outlining our legal duties o Staying legal often requires a prudent respect for the many gray areas that color an activity as widespread and multifaceted as negotiation  Element 1: Knowing o To commit fraud, a negotiator must have a particular state of mind with respect to the fact he/she misrepresent o One way of getting around fraud, therefore, might be for the speaker to avoid direct contact with information that would lead to a “knowing” state of mind  Many courts have stretched the definition of “knowing” to include statements that are made with conscious and reckless disregard for their truth o Victims of misstatements that were made negligently or even innocently may obtain relief in certain circumstances  These statements are not deemed fraudulent  They are a way of recognizing that a deal was based on a mistake  Element 2: Misrepresentation o The law requires a negotiator to make a positive misstatement before a statement is judged fraudulent o A basic legal rule for commercial negotiators is “Be silent and be safe” o There are circumstances when it may be fraudulent to keep your peach about an issue even if the other side does not ask about it  When negotiators make a partial disclosure that is or becomes misleading in light of all the facts  When the parties stand in a fiduciary relationship to each other  When the non-disclosing party has vital information about the transaction not accessible to the other side  In general, sellers have a greater duty to disclose hidden defects about their property than buyers do to disclose “hidden treasure”  When special codified disclosure duties, such as those regarding contracts of insurance or public offering of securities, apply o If none of these four exceptions applies, neither side is likely to be found liable for fraud based on a nondisclosure  Element 3: Material o Lies about demands and bottom-line prices are so prevalent in bargaining that many professional negotiators do not consider such misstatements to be lies, preferring the term “bluffs” o Misleading statements about bottom-line prices and demands also enable parties to test the limits of the other side’s commitment to their expressed preferences o When a shopper lies to a storekeeper that she can get an item cheaper across town, the statement is not “material”  Element 4: Fact o Buyers and sellers cannot take everything said to them at face value o “The state of a man’s mind is as much a fact as the state of his digestion”  Lies regarding intention even have a special name in the law: promissory fraud  The key element in a promissory fraud case is proof that the speaker knew he could not live up to his promise at the time the promise was made o When negotiators offers statements of opinion that are flatly contradicted by facts know to them about the subject of the transaction, they may be liable for fraud o What seems to matter in these cases is unfairness o If a statement of intention or opinion so conceals the true nature of the negotiation proposal that a bargaining opponent cannot accurately assess an appropriate range of values or risks on which to base the price, then is may be fraudulent  Element 5: Reliance o When one side has a decided advantage, American courts are more sympathetic to the idea that the victim reasonable relied on the lie o Read contracts carefully before you sign them, and question the assurances that contract language changing the nature of the deal is just a technicality or was required by lawyers  Element 6: Causation and Damages o You cannot make a legal claim for fraud is you have no damages caused by the fraudulent statement of omission Beyond the Law: A Look at Ethics  The legal rules that govern bargaining are suffused with a number of ethical norms o Professionals with a big bargaining advantage are sometimes held to a higher standard when negotiating with amateurs and consumers than they are when they approach others as equals o Parties that stand in special relationships to each other, such as trustees or partners, have heightened legal disclosure duties o Lies protecting important factual information about the subject of the transaction are treated differently from lies about such things as your alternatives or bottom line o Silence is unacceptable if an important fact is inaccessible to the other side unless you speak up Three Schools of Bargaining Ethics  The “It’s a Game” Poker School o The Poker School of ethics sees negotiation as a “game” with certain “rules”  Rules are defined by the law  Conduct within the rules is ethical, outside the rules is unethical o The modern founder of the Poker Schools was Albert Z. Carr o Bluffing and other misleading but lawful negotiating tactics are “an integral part of the [bargaining] game, and the executive who dos not master [these] techniques is not likely to accumulate money or power” o Good players should ignore the “claims of friendship” and engage in “cunning deception and concealment” in fair hard bargaining encounters o The goal is to get the other side to agree to terms that are as close as possible to your last proposal o Negotiators always attempt to disclose a good hand if they have one in the bargaining game  Most effective bluffs are realistic, attractive, difficult-to-check (but false) alternative or authoritative (but false) supporting standards  The “Do the Right Thing Even If It Hurts” Idealist School o Bargaining is an aspect of social life, not a special activity with its own unique set of rules o The same ethics that apply in the home should carry over directly into the realm of negotiation  If it is wrong to lie or mislead in normal social encounters, it is wrong to do so in negotiations o Idealists do not entirely rule out deception in negotiation  If the other party assumes you have a lot of leverage and never asks you directly about the situation, you do not necessarily have to volunteer information weakening you position  The idealist can decline to answer questions o Members of the Idealist School prefer to be candid and honest at the bargaining table even if it means giving up a certain amount of strategic advantage o Idealists admit that deception in negotiation rarely arouses moral indignation unless the lies breach a trust between friends, violate a fiduciary responsibility, or exploit people such as the sick or elderly, who lack the ability to protect themselves o Idealists strongly reject the idea that negotiations should be viewed as “games”  Serious, consequential communication acts o Idealists think that the members of the Poker School are predatory and selfish  The Poker School thinks that idealists are native and even a little silly o Idealism leaves its members open to exploitation by people with standards other than their own  The “What Goes Around Comes Around” Pragmatist School o In common with the Poker School, this approach views deception as a necessary part of the negotiation process o Unlike the Poker School, it prefers not to use misleading statements and overt lies if there is a serviceable, practical alternative o The Pragmatist Schools displays concerns for the potential negative effects of deceptive conduct on present and future relationships  Lying and other questionable tactics are bad not so much because they are “wrong” as because they cost the user more in the long run than they gain in the short run o Lies and misleading conduct can cause serious injury to one’s credibility  Credibility is an important asset for effective negotiators both to preserve working relationships and to protect one’s reputation in a market or community o The Poker School is less mindful of reputation and more focused on winning each bargaining encounter within the rules of the “game” o False justification and rationales are marginally acceptable because they are usually less important to the transaction and much harder to detect as falsehoods than are core facts about the object being bought and sold o Pragmatists are also somewhat looser within the truth when using blocking techniques – tactics to avoid answering questions that threaten to expose weak bargaining position  Declare the question out of bounds  Answer a different question  Dodge the question  Ask a question of your own  Change the subject Techniques for Coping with Unethical Tactics  Watch out for “transactions” o When the price is the primary issue and there are limited prospects for future dealings between the parties, there is a higher risk of ethical problem o Be on guard whenever the stakes matter and the relationship does not o The risk of unethical conduct rises even higher when competition is “hot”  Research shows that leverage imbalances at the bargaining table encourage unethical behaviour  Rely on relationships whenever possible o Try to get recommendations, referrals, and introduction that will show the other side that the relationship to you matters o Research shows that in general, the prospect of an ongoing relationship raises people’s ethical standards  Probe, probe, probe o Be alert to the potential for deception in negotiation o If your suspicions are aroused don’t rest until you discover what’s going on o Probing will help you gain insight into whether the other side’s story holds together, but do not expect the other party to come right out and admit he is acting unethically  Be assertive and persistent o When other people are acting unethically, it is up to you to insist on fairness  Maintain your own standards – don’t sink to theirs o No matter what school of bargaining ethics you adhere to, you need to keep your record clean both to maintain self-respect and to avoid gaining a reputation for slippery dealings o As soon as you begin acting unethically, you lose the right to protest other people’s conduct  Once you join them in the gutter, you forfeit your moral and legal advantage o Whenever you are tempted to lie about something, stop, think for a moment, and hen find something to tell the truth about A Rogue’s Gallery of Tactics  Lies about bottom lines and alternatives o They are the most common lies of all o Take any statement of this sort with a big grain of salt unless you know and trust the other party  Lowballing o “too good to be true” offers o The other side gets you committed to the deal before revealing the full, true cost to you o After you say “yes,” they know you want what they are peddling and they work the price back in their favor by adding terms  Phony Issues o “Decoy” or “Red Herring” technique o One side lists four or five issues as being very important or vital, when in fact only one or two matter  That side pushes hard on the whole agenda, creating a serious risk of impasse  Then relents on all the phony issues in exchange for major concessions on the issues that really matter  Fake Authority Ploys o People will lies an say they have authority when they do not  Lies are generally in the service of a lowball maneuver  They are hard to combat  When in doubt, it pays to ask for proof of authority when the other side makes an offer o People saying they have authority when in fact they do  If you make an offer that is within their authority, they will lies an say that they are not authorized to accept you offer because it is not high or low enough  Avoid dealing with agents if you can  Over-commitment o The other negotiator drags out the negotiation process and/or gets you to make an investment based on an assumption that it will go through o Then raises/lowers the price or adds new terms at the last minute, trusting that you have too much invested to lose and so will say “yes”  Good guy / bad guy o It uses contrast effect to make otherwise unreasonable terms and conditions look reasonable o The best way to fight this is to recognize it, name it, and refuse to go along with it  Consistency traps o The other negotiator gets you to agree to an innocent-sounding standard or norm o Then he springs the trap by showing you that his proposal is the logical consequence of your admission  Reciprocity ploys o Watch out for people who either refuse to reciprocate in the process or who only appear to do so without giving substantive answers  The nibble o Parties nibble at an agreement just before closing o They raise an extra issue or demand that in and of itself is so small it does not seem worthy of debate Even Swaps: A Rational Method for Making Trade-Offs  The more alternatives you’re considering and the more objectives you’re pursuing, the more trade-offs you’ll need to make  The sheer volume of trade-offs, though, is not what makes decision making so hard o It’s the fact the each objective has its own basis of comparison  Even swaps provide a practical way of making tradeoff among any set of objectives across a range of alternatives o Form of bartering – it forces you to think about the value of one objective in terms of another  The even swap method will not make complex decisions easy o You’ll still have to make hard choice about the values you set and the trades you make o What it does provide
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