Truth 5. Four sand traps in the golf game of negotiation
My dad has been a golfer for as long as I can remember. He had a golf analogy for almost every aspect of life. The first time he took me golfing, I hit the ball straight into the first hole’s sand trap. “Is that good, Dad?” “No, it’s not. It’s hard to get out of there. You need to stay OUT of the sand traps in the first place.”
When I started seeing patterns in the underperformance of otherwise smart people at the negotiation table, it occurred to me to think of these problems as sand traps. Every negotiation table is like a golf course: We may not have played a particular course before, but all courses have sand traps, and it helps to know where they are. If we know where the problem spots are, we’re in a better position to reach our goals. If we hit our ball into a marsh on the first hole, we may never recover.
This Truth outlines four sand traps. I’ve been in every one of them, and I’d sure like to see you avoid them.
Sand trap #1: Leaving money on the table
Leaving money on the table is a lose–lose negotiation. Lose–lose negotiation, not surprisingly, is the opposite of win–win. On average, people settle for terms worse for both parties in one out of every five negotiations!1 The problem is that they are unaware that win–win possibilities exist.
Sand trap #2: Settling for too little
This is also known as the winner’s curse. Consider Ron, for example, who was in Kuwait during the Gulf War. During his time of service, Ron was engaged, and he wanted to buy his fiancée a gold necklace before he returned to the States. He spotted the perfect necklace in a Kuwait jewelry store. It was priced at about $600 U.S. dollars. Ron offered the merchant $300. “Sold!” the merchant said immediately, beaming. Ron was proud of his ability to get such a great deal. But the merchant was giddily happy and even offered Ron a free matching set of earrings. Ron’s pride turned into regret. He had fallen prey to the winner’s curse, which occurs when a negotiator’s first proposal is immediately accepted by the other party, signaling that the offer was too generous.
When Ron realized he had fallen prey to the winner’s curse, he couldn’t easily retract his offer in good faith. The merchant had already packed the necklace and earrings in a charming gift box and embraced Ron, wishing him “a wonderful married life!”
Sand trap #3: Walking away from the table
This is the “hubris” problem. Negotiators who are so prideful that they walk away from the table dramatically even when they have no other attractive options are essentially bluffing. They lack the good sense to swallow their pride and return to the table.
I have known several negotiators guilty of hubris. They often dig their own graves because once they have made a take-it-or-leave-it offer, they can’t tolerate the thought of losing face by returning to the table. You may argue that it’s important to display toughness and resolve to the other side. However, earning a reputation for being tough doesn’t serve you well at the negotiation table. Indeed, a reputation as a tough negotiator leads to a number of highly undesirable outcomes—for example, counterparties will treat you with greater suspicion and act much tougher than they normally would. In an investigation of how bargaining reputation affects how others treat you, Cathy Tinsley found that “tough guys finish last,” meaning that people negotiate more aggressively with those who have a reputation for toughness.2
Sand trap #4: Settling for terms that are worse than your current situation
I call this the “agreement bias.” I use it to refer to the negotiator who is so desperate to make a deal that she literally forgets she has a better alternative elsewhere and accepts the offer in the heat of the moment.
For example, if I currently have an offer of $300,000 for my home and your best offer to me is $295,000, it wouldn’t be in my interest to make a deal with you, all other things being equal.
Nevertheless, negotiators often get swept away by a negotiation’s momentum. Indeed, once we sit down at the table and invest in a relationship, we often feel bad walking away from it. Simply put, negotiators often rationalize accepting inferior terms.
Write your walk-away point on a piece of paper so you can refer to it before you accept a proposal.
To prevent this, write your walk-away point on a piece of paper so you can refer to it before you accept a proposal. Obviously, the writing should be encrypted so that the note wouldn’t mean much more than a grocery shopping list if the other party sees it!