Dr. Robin L. Pinkley, Professor, Management and Organizations, Cox School of Business at SMU
Whether professional negotiator or novice, you negotiate when you rise in the morning until you sleep at night, over everything from carpool duty with your spouse to managing relations with external vendors. Shifting organizational forms, unprecedented economic pressures, and the need to juggle many roles simultaneously suggest the need to negotiate effectively and efficiently in all aspects of your life. So the question isn’t whether you’ll negotiate today, but how well?
Examples like the NBC Universal spinoff deal between GE and Comcast or Southwest Airlines’ recent employment negotiations with SWAPA (Southwest Airlines Pilots’ Association) remind us that a key determinant of all negotiations is negotiator power, with power defined as the value that each party brings to the table over the value of each party’s alternative to the deal (often called a BATNA or Best Alternative To a Negotiated Agreement). Given the profound impact that power has on every negotiation (whether spouse or customer), you’re wise to proactively enhance your power BEFORE you negotiate, in four ways:
1) Increase the other party’s perception of your value (research what they care about and how they can get it from you);
2) Decrease the other party’s perception of their value (communicate what they’ve overvalued or don’t have that you need and why what you’re justified in asking for it);
3) Increase the value of your BATNA (generate viable alternatives and share them strategically); and
4) Decrease the other party’s perception of their BATNA (bring value others don’t have and differentiate yourself).
Of these strategies, the most successful is creating a viable alternative and knowing when and how to use it. Entering a negotiation without one is paramount to standing on quicksand hoping a vulture will fly over and throw you a rope. Surprisingly, sharing information about a viable alternative increases the value you get from the deal and the other party’s satisfaction with that deal! Why? Because it makes your request seem more legitimate and what you bring to the table more valuable (the runner-up on The Bachelorette suddenly appears more appealing and attractive when many women seek his attention on next season’s The Bachelor). A good BATNA provides social proof regarding the value you bring to the table and a sense of scarcity increasing the fear that you’ll walk away. Our research found that recruiters changed their perception of a candidate’s market value (how much it would take to hire the candidate) and their perceptions of the candidate’s actual value (how much the candidate is actually worth) after hearing of his alternative job offer. While his market value would go up since his high-salaried alternative means you’d have to pay him more to get him, his actual value to your organization (based on things like past performance history, education, and experience) would not, since he has done nothing to enhance his real value since his interview. Thus, the change in perception and willingness to pay him more is irrational if his market value is now higher than his original value to you.
Recently we discovered the insane power of Phantom BATNAs. A phantom alternative is one that might exist in the future but does not when the negotiation takes place, as would be the case when your customer asks for a discount given your competitor’s intention to create a competitive technology that is neither developed nor available in the market. While Phantom alternatives are more illusion than reality, customers who have them do as well as those with a real alternative in hand because both parties are biased by its existence. Rather than treating a phantom as non-existent or of little relative significance (due to its lower expected value based on its probability times its potential value) to slay it by reminding the holder of its true nature, lower value, and inherent risk, those on the receiving end miss that opportunity, treating it as real instead.
The lesson learned from our work on Phantom BATNAs is that you should create and share information about your Phantom, as well as existing BATNAs with no need or benefit associated with deception regarding its nature. An alternative stated as a “possible alternative,” or one with even a 25 percent probability, increases your power and share of the pie as much as an alternative in hand with 100 percent probability. On the receiving end, it’s important to recognize and slay your opponent’s Phantoms, clarifying the difference between a bird one hopes will land in the bush and the one currently held in your hand.
Savvy negotiators know that what one gains, one earns, and that what one earns is determined before the parties sit down at the table. So before you sit, plan your power strategy carefully to claim more value and be perceived better for it.
[Image courtsey: geralt – Pixabay]
About the Author
Dr. Robin L. Pinkley is the Duchossois Endowed Professor of Management and Organizations, Cox School of Business at SMU. She is the creator of the Gain-Gain Approach to Profitable Negotiation which she applies through executive development, consulting and deal-making. Dr. Pinkley’s research focuses on negotiator power and the use of strategic anchors for enhancing perceptions of value. She is the co-author (along with Greg Northcraft) of “Get Paid What You’re Worth: The Expert Negotiators Guide to Salary and Compensation” and has published numerous articles in business and psychology journals.