26 Sep 2005  Research & Ideas

What Perceived Power Brings to Negotiations

What role does "perceived power" play in negotiations? For one thing, it may help all the parties take away a win at the table. Professor Kathleen McGinn discusses new research done with Princeton’s Rebecca Wolf.

 

Power at the bargaining table is rarely distributed evenly. A job seeker lacking alternative offers is not going to have much "hammer" in salary discussions with a prospective employer. But what happens when you are perceived to have more power than objective components such as organizational rank would indicate—recognized experience in a particular style of negotiation, for example. Can such "perceived relative power" make a difference at the table?

The short answer is yes. In "Perceived Relative Power and its Influence on Negotiations," published earlier this year in the journal Group Decisions and Negotiation, authors Rebecca L. Wolfe and Kathleen McGinn found that in negotiations where participants shared relatively equal perceived power, the outcome tended to address the needs of both parties, or "integrativeness." Still, our alternative-less job seeker might not get a top salary even with a high level of perceived power—but the end result would reflect concessions on both sides and a larger overall pie to be shared. One possible reason: Parties perceived to be on a near-equal footing will share more information than would be the case in a relationship where the all-powerful employer insists on a one-sided result.

The results came from an experiment that simulated a second-round job interview. Some 124 undergraduates from five schools in the northeast United States participated. They played the role of either candidate or recruiter, and had to reach agreement on salary, vacation time, bonus, insurance coverage, and moving expenses. To vary perceived power, participants were given various levels of information regarding their own alternative and the alternative of their counterpart, as well as general knowledge about the other party and how that party viewed them.

Wolfe is a research associate at Princeton, while McGinn is the Cahners-Rabb Professor of Business Administration at Harvard Business School.

In her office at Baker Library, McGinn discussed the research and its implications for managers.

Mallory Stark: What is perceived relative power in the negotiation environment and what did your research show in terms of how it can affect the outcome?

Kathleen McGinn: Perceived relative power has two components. First, it's perceived in the sense that it is not an objective feature of either what you bring to the negotiation or, say, your relative position in an organization, but rather a perception of the parties in the negotiation as to how much power you have in that setting.

And the second component is that it's relative. While I might feel very powerful in a negotiation with someone who needs what I have and doesn't have alternatives or other resources, I might perceive my power to be very low in similar negotiations with someone whom I perceive as a very talented negotiator. So, power in a negotiation isn't just perceived in an absolute sense, but perceived relative to the other party in the negotiation.

Nearly all research on power and negotiations operationalizes power as an objective feature of what you bring into the negotiation. It's either what your alternative is or it's the number of other options that you have available. But this doesn't take into consideration either your perceptions of that power—I may have a really rotten alternative, but feel like I'm powerful—or the relative strengths we bring to the negotiation. And past research has also not paid attention to whether I knew what you were bringing to the negotiation. If I don't know what you're bringing to the negotiation, I'm not sure how I can know whether I'm more powerful than you or you're more powerful than I am or we're equally powerful.

One of the things that we've done to further the research is that the past research . . . never found effects on how well we worked together on the value we were able to create in the negotiation.

Q: Which is what you call the integrativeness?

A: Exactly, so we not only more accurately, I think, manipulated what power is in negotiation, we also found that power has tangible results we hadn't been able to see otherwise.

What we really have done is gone back to R.M. Emerson, sort of the grandfather of power research, and looked at the way he conceptualized it initially. He didn't use exactly these terms, but he conceptualized power as relative and perceived. So, while we've brought it into the negotiation realm and operationalized it in a way that decades of research had not, it's not our idea, it is Emerson's original idea.

Q: I thought that the methodology that you used was interesting. We wondered why you chose a job interview negotiation to test the hypotheses.

A: We have found in lots of research that if you're going to do a lab study of a negotiation you have to put your participant in a situation in which they can picture themselves. One of the famous negotiations that a lot of research is based on is buying and selling a refrigerator on a wholesale level. It's just not something that most of the students we collect our data from have ever done. They don't know anything about refrigerators, they don't know anything about wholesale purchases, etc. So we felt that in this study the simulation needed to be something that participants could actually see themselves in somehow, and that could take them out of the feeling of, "I'm in an experiment."

So that's one piece. The other is that it's a negotiation in which it's very easy to manipulate perceptions of power, because we all have this model in our head where, if I have lots of other job alternatives or a really good job alternative, then I'm sitting pretty in this negotiation. And so the manipulation of the alternatives was really straightforward.

Q: What can managers and other professionals learn from this research when they find themselves in negotiations?

A: I think the critical piece here is the distinction between what brings you the greater amount of the distribution and what increases the overall pie, the integrativeness, as we call it.

It's still true that if you have more or better alternatives in a negotiation, you're very likely to get more of the pie, regardless of perceived relative power. In this, our findings corroborate those of past research. This means that equalizing the perceived power in the negotiation is not going to mess you up in terms of your relative "take" in the negotiation. So once you understand that, then you can set up conditions where both parties feel an equal voice, feel there is relatively equal power, and can create as many resources as possible.

You can imagine people who try to position and push their way in to show how much power they have in the negotiation, and that's self-defeating. The objective alternatives that they have will determine their portion of the pie. If they try to fluff up their power too much and the other party actually buys it and sees themselves as less powerful, then what happens is the other party closes up, we share less information, we're less likely to create a big pie, and while I might get more of it, I'm going to get more of a much smaller pie.

So, the take-away for managers is that there's a great advantage to be gotten for both sides in creating an environment in which both parties feel powerful. And I don't mean that just on the sort of touchy-feely level. For example, when you're negotiating across departments within an organization, encourage the departments to make sure that they've looked at different ways to get this job done, that they're bringing in a full set of resources so that when they sit down at the table they feel empowered relative to really speaking their piece.

The nice thing about this is that assuming you do have good alternatives (make sure that you do before you go into a negotiation), you're not then giving away resources just to be equalizing the relative power. Instead, you're increasing the likelihood that you and your negotiation partner will create value in the negotiation.

Q: What are you working on now? Are you working on research based on this?

A: No, I'm not. This is Rebecca Wolf's dissertation—she really is the driving force behind this research. The research that I have started on is research on gender in negotiations, mostly with Hannah Riley Bowles at the Harvard University Kennedy School of Government.

There's a great advantage to be gotten for both sides in creating an environment in which both parties feel powerful.

One of the things that came out of the research with Rebecca, interestingly, was that when we first looked at the results we kept getting these weird findings. And what we found was that a man's perceived power is relatively fixed—their perceptions of what they have in the negotiation varies based on their alternatives, but is less likely to vary based on what they know about the other party. A woman's perceptions of power, however, vary based on her own alternatives as well as on what she knows about the other party's alternatives….

Q: Wow, it's interesting that it was so clear cut. Were you surprised at that?

A: Yes, I mean, in some ways we were glad we found it because any time you have unexpected outcomes it's very hard to figure out why you're getting odd things in your results. Once we controlled for gender, the results were clean. I was surprised because we were very clear about the power manipulations. These people knew the other party had a really good alternative or a really bad alternative. And the men usually ignored it. Of course, that's not universal, but men tended to ignore the other party's alternatives, while the women tended to weight it highly in their perceptions of their relative power.

Abstract: Perceived Relative Power and its Influence on Negotiations

by Rebecca J. Wolfe and Kathleen L. McGinn

In an experimental study, we investigate perceived relative power in negotiations and its effect on the distribution of resources and the integrativeness of agreements. We contrast perceived relative power with the objective individual level measure of power often used in past research: the parties' alternatives to a negotiated agreement. We found that alternatives affected the distribution of outcomes, while perceived relative power and alternatives affected the integration of outcomes. We found that negotiating pairs who perceived a smaller difference in relative power reached agreements of greater integrativeness than pairs who perceived a greater power difference, even after controlling for alternatives and aspirations. We explore the implications of treating power in negotiations as a perceived and relational construct.


Excerpted from "Perceived Relative Power and its Influence on Negotiations," Group Decisions and Negotiation, 14: 3-20, 2005.

About the author

Mallory Stark is a career information librarian at Baker Library.