Most people do not stay in the same job that they take upon graduating from college or receiving their MBA degree. The average person stays at a job for 4.4 years, and 91% of millennials expect to stay at their jobs less than three years, averaging 15–20 jobs over the course of their professional lives.¹⁰ The dynamic, changing nature of business means that people must renegotiate their existence in organizations throughout their careers. The advent of decentralized business structures and the absence of hierarchical decision making provide opportunities for managers, but they also pose some daunting challenges. People must continually create possibilities, integrate their interests with others, and recognize the inevitability of competition both within and between companies. Managers must be in a near-constant mode of negotiating opportunities. Negotiation comes into play when people participate in important meetings, get new assignments, lead a team, participate in a reorganization process, and set priorities for their work unit. Negotiation should be second nature to the business manager, but often it is not.

The increasing interdependence of people within organizations, both laterally and hierarchically, implies that people need to know how to integrate their interests and work across business units and functional areas. For example, when Lafayette Park, a historical park in San Francisco, was scheduled for a renovation, many negotiations erupted between the numerous interest groups. The residents were concerned with the aesthetics of the park, the noise level during construction, as well as lack of use during the threeyear revamp. The Recreation and Park Commission wanted to provide new and interesting elements to the playground as well as keep the project on budget and on time, and the historical society wanted to preserve the park’s natural history. All the interest groups convened for facilitated meetings with breakout sessions to address and negotiate the different needs of each group. Some of the needs expressed were related to keeping the playground in a naturalistic theme, while also providing benches along the hilltop clearing to enjoy the view of the bay, and not trimming or removing too many trees.¹¹

The increasing degree of specialization and expertise held by businesspeople indicates that people are more and more dependent on others. However, other people do not always have similar incentive structures, so managers must know how to promote their own interests while simultaneously creating joint value for their organizations. This balance of cooperation and competition requires negotiation.

In March 2014, approximately 10.5 million people in the United States were unemployed.¹² That was down from 15.3 million unemployed in November of 2009, the highest number of unemployed Americans since the Bureau of Labor Statistics began tracking the nation’s unemployment in 1948.¹³ Economic pressures and forces such as these mean that negotiators need to know how to operate in uncertain and ambiguous environments. Focusing on minimizing losses may loom larger than focusing on profits.

Information technology also provides special opportunities and challenges for negotiators. Information technology has created a culture of 24/7 availability. With technology that makes it possible to communicate with people anywhere in the world, managers are expected to negotiate at a moment’s notice. Computer technology, for example, extends a company’s obligations and capacity to add value to its customers. Because customers expect companies to be accessible to them 24/7, businesses have rethought how to respond quickly. For instance, when Scott Stratten, President of UnMarketing.com, tweeted about his disappointing experience with a Delta flight attendant, the company responded with a polite apology within 16 minutes. Stratten was so impressed by Delta’s customer service responsiveness through Twitter that he immediately booked another flight with Delta the following week. Delta uses the 24/7 availability to their advantage and employs 12 people to manage the company’s Twitter account.¹⁴ Conversely, people who are not online feel the pressure to perform when they finally do log back on. For example, Arianna Huffington, founder of The Huffington Post, promised her daughter that during her college tour she would not check her smartphone. Huffington kept her promise, not turning on her smartphone during the tour, but while her daughter slept in the hotel room that night, she admitted staying up all night answering e-mails and making sure she didn’t miss anything from the few hours she took off.¹⁵

Most managers must effectively cross cultural boundaries to do their jobs. Setting aside obvious language and currency issues, globalization presents challenges in terms of different norms of communication. Chip Starnes, cofounder of Specialty Medical Supplies, learned a harrowing lesson in cultural fit when he showed up at his factory near Beijing, China to deliver severance payments for 30 workers laid off when Starnes moved a company division to Mumbai, India. The remaining 100 employees, convinced the entire factory would be closed, demanded severance and barricaded Starnes inside the plant for six days. Cases of managers being held captive by dissatisfied workers, while police look the other way, is not a rare circumstance in China, a cultural fact that Starnes certainly learned. After accepting the workers’ demands—giving 97 workers two months’ salary and compensation and rehiring the previously laid-off workers on new contracts—Starnes was released and declared that he had no plans to ever come back though the factory would remain open.¹⁶ Managers need to develop negotiation skills that can be successfully employed with people of different nationalities, backgrounds, and personalities. Consequently, negotiators who have developed a bargaining style that works only within a narrow subset of the business world will suffer unless they broaden their negotiation skills to effectively work with different people across functional units, industries, and cultures.¹⁷ It is a challenge to develop negotiation skills general enough to be used across different contexts, groups, and continents but specialized enough to provide meaningful behavioral strategies in a given situation.

Egocentrism is the tendency for people to view their experiences in a way that is flattering or fulfilling for them. Two-thirds of MBA students rank their decision-making abilities as above average.²² In one investigation, people who were self-absorbed in terms of reflecting upon their own values were more likely to exhibit decision-making biases, such as the confirmation bias. In contrast, people who had taken time to focus on values that were not important to them were more likely to focus on valid threats and assess correlations more accurately in data.²³ As an example, the National Safety Council estimates that 24% of all crashes on the highway involve cell phone use—either dialing, talking, or texting. Yet, drivers overestimate their own abilities to multitask.²⁴

Confirmation bias is the tendency of people to see what they want to see when appraising their own performance. The confirmation bias leads people to selectively seek information that confirms what they believe is true. Whereas the confirmation bias may seem perfectly harmless, it results in a myopic view of reality and can hinder learning. Three weeks into the 2010 BP Deepwater Horizon oil disaster, former BP chief executive, Tony Hayward downplayed the looming environmental disaster despite mounting evidence to the contrary. Hayward claimed the spill in Gulf of Mexico was “relatively tiny” compared with the “very big ocean.” Oil continued to leak at a rapid rate for nearly two months until the well was finally capped, and the total amount of oil poured into the Gulf surpassed the 1989 Exxon Valdez disaster as the largest spill in U.S. history.²⁵

A third reason why people often fall short in negotiation is the human tendency to satisfice.²⁶ According to Nobel Laureate Herb Simon, satisficing is the opposite of optimizing. In a negotiation situation, it is important to optimize one’s strategies by setting high aspirations and attempting to achieve as much as possible; in contrast, when people satisfice, they settle for something less than they could otherwise have. Over the long run, satisficing (or the acceptance of mediocrity) can be detrimental to both individuals and companies, especially when a variety of effective negotiation strategies and skills can be cheaply employed to dramatically increase profit. (We discuss these strategies in detail in the next three chapters.)

To achieve and maintain effectiveness in the business world, people must have insight into their limitations. The same is true for negotiation. However, most people are “blissfully unaware of their own incompetence.”²⁷ Moreover, it creates a cycle in which the lack of skill deprives them of not only the ability to produce correct responses but also the expertise necessary to surmise that they are not producing them. As a case in point, students taking a test were measured in terms of their insight about their own performance.²⁸ The students were grouped into quartiles based on their performance. The lowest-performing quartile greatly overestimated their performance on the test. Even though they were actually in the 12th percentile, they estimated themselves to be in the 60th percentile.²⁹ This example is not an isolated case; people overestimate their percentile ranking relative to others by as much as 40 to 50 points. A study of CEOs’ merger and acquisition decisions revealed that CEOs develop overconfidence through a self-attribution bias when making deals. CEOs overly attribute their influence when deals are successful. This leads CEOs to make more deals that are not successful.³⁰ A better business plan would involve judging each deal on its own merits, rather than simply using the past to justify the present decision. Moreover, the problem cannot be attributed to a lack of incentives. The overestimation pattern even appears after people are promised significant financial rewards for accurate assessments of their performance.³¹

Related to the principle of self-reinforcing incompetence is the fact that people are reluctant to change their behavior and experiment with new courses of action because of the risks associated with experimentation. In short, the fear of losing keeps people from experimenting with change. Negotiators instead rationalize their behavior in a self-perpetuating fashion. The fear of making mistakes may result in a manager’s inability to improve his or her negotiation skills. In this book, we remove the risk of experimentation by providing several exercises and clear demonstrations of how changing one’s behavior can lead to better negotiation outcomes. We invite managers to be active learners in understanding their own values when it comes to negotiation.

Probably the most common myth is that most negotiations are fixed-sum, or fixed-pie, in nature, such that whatever is good for one person must ipso facto be bad for the other party. The truth is that most negotiations are not purely fixed-sum; in fact, most negotiations are variable-sum in nature, meaning that if parties work together, they can create more joint value than if they are purely combative. However, effective negotiators also realize that they cannot be purely trusting because any value that is created must ultimately be claimed by someone at the table. Our approach to negotiation is based on Walton and McKersie’s conceptualization that negotiation is a mixed-motive enterprise, such that parties have incentives to cooperate as well as compete.³²

The fixed-sum myth gives rise to a myopic view of the strategic choices that negotiators have. Most negotiators believe they must choose between behaving in a tough (and sometimes punitive) fashion or being “reasonable” to the point of soft and concessionary. We disagree. The truly effective negotiator is neither tough as nails nor soft as pudding but rather, principled.³³ Effective negotiators follow an “enlightened” view of negotiation and correctly recognize that to achieve their own outcomes they must work effectively with the other party (and hence, cooperate) but must also leverage their own power and strengths.

A pervasive belief is that effective negotiation skills are something that people are born with, not something that can be readily learned. This notion is false because most excellent negotiators are self-made. In fact, naturally gifted negotiators are rare. We tend to hear their stories, but we must remember that their stories are selective, meaning that it is always possible for someone to have a lucky day or a fortunate experience. This myth is often perpetuated by the tendency for people to judge negotiation skills by their car dealership experiences. Purchasing a car is certainly an important and common type of negotiation, but it is not the best context by which to judge your negotiation skills. The most important negotiations are those that we engage in every day with our colleagues, supervisors, coworkers, and business associates. These relationships provide a much better index of one’s negotiation effectiveness. In short, effective negotiation requires practice and feedback. The problem is that most of us do not get an opportunity to develop effective negotiation skills in a disciplined fashion; rather, most of us learn by doing. Experience is helpful but not sufficient.

It is only partly true that experience can improve negotiation skills; in fact, experience in the absence of feedback is largely ineffective in improving negotiation skills.³⁴ Casual experience as an effective teacher has three strikes against it. First, in the absence of feedback, it is nearly impossible to improve performance. For example, can you imagine trying to learn mathematics without ever doing homework or taking tests? Without diagnostic feedback, it is very difficult to learn from experience.

The second problem is that our memories tend to be selective, meaning that people are more likely to remember their successes and forget their failures or shortcomings. This tendency is, of course, comforting to our ego but it does not improve our ability to negotiate.

In addition, experience improves our confidence, but not necessarily our accuracy. People with more experience grow more confident, but the accuracy of their judgment and the effectiveness of their behavior do not increase in a commensurate fashion. Overconfidence can be dangerous because it may lead people to take unwise risks.

A pervasive myth is that effective negotiation necessitates taking risks and gambles. In negotiation, this approach may mean saying things like, “This is my final offer” or “Take it or leave it” or using threats and bluffs. This is what we call a “tough” style of negotiation. Tough negotiators are rarely effective; however, we tend to be impressed by the tough negotiator. In this book we teach negotiators how to evaluate risk, how to determine the appropriate time to make a final offer, and more importantly how to make excellent negotiation decisions in the face of the uncertainty.

An interesting exercise is to ask managers and anyone else who negotiates to describe their approach to negotiating. Many seasoned negotiators believe that their negotiation style involves a lot of “gut feeling” or intuition. We believe that intuition does not serve people well. Effective negotiation involves deliberate thought and preparation and is quite systematic. The goal of this book is to help managers effectively prepare for negotiation, become more aware of their own strengths and shortcomings, and develop strategies that are proactive (i.e., they anticipate the reactions of their opponent) rather than reactive (i.e., they are dependent upon the actions and reactions of their opponent). Thus, excellent negotiators do not rely on intuition; rather, they are deliberate planners. As a general rule, don’t rely on your intuition unless you are an expert.