A simple view of negotiation presents a cold transaction between what one person has and what the other person is willing to pay for it. If the price is right, the deal gets done.
As anyone who has recently bought a car or sold a house knows, however, negotiations are rarely so dispassionate. As soon as the checkbook comes out a flood of emotions comes out with it—fear, anxiety, competiveness, anger, annoyance—all of which can influence what either side is willing to accept.
“I can't imagine a good negotiator who doesn't have either an explicit understanding about emotions, or is highly intuitive about the process”
Emotions such as satisfaction and elation can be quite rare in negotiation, says Andy Wasynczuk, MBA Class of 1953 Senior Lecturer of Business Administration at Harvard Business School. His new teaching note, Emotions in Negotiations: An Introduction, traces the history, theory, and research on how emotions can affect transactions between parties. Wasynczuk and his coauthor, independent researcher Colleen Kaftan, do so using an everyday example of a work-at-home consultant ("Kate") dealing with an electrician ("Peter") over restoring power after a storm. They intentionally picked the situation as one to which students could relate.
"Our MBAs generally feel like they are very ill-equipped for negotiation, whether that's dealing with a landlord or buying a car—let alone the business situations they will be getting into," says Wasynczuk. "Rather than discussing topics in the rarified air of investment banking, an industry foreign to many of our students, we wanted to be as universal as possible."
Not that it is a simple situation emotionally. Stressed out over lost work because of the storm, Kate is further annoyed when repairman Peter is three hours late. When he responds brusquely at her overtures toward friendliness and offers what she feels is an unreasonable price and timeline for repairs, she gets angry. Before long, both sides are yelling, and Peter marches out the door.
The question for students is: What could Kate have done differently to get a better outcome?
"We spend a lot of time talking both about what emotions we elicit in others based on our behavior, and what we need to do to manage our own emotions. There are lessons on both sides," says Wasynczuk. "I can't imagine a good negotiator who doesn't have either an explicit understanding about emotions, or is highly intuitive about the process."
Negotiating In The Nfl
Wasynczuk (HBS MBA '83) should know—he served as chief operating officer for the New England Patriots for 15 years, where he was in charge of negotiating high-stakes player contracts involving millions of dollars.
He intuitively understood that emotions were an important factor in dealing with people as passionate as athletes. "The last thing I wanted to do was create an excuse for a player or agent to get angry. That would create a power struggle, which was a recipe for disaster."
Wasynczuk learned to enter into contract talks with a smile—and to rationalize away his own anger when a deal couldn't be struck. "If an agent was being greedy with me, they were probably being greedy with other teams as well," he told himself. "If the other team ended up paying that money they were making a mistake."
Business schools began teaching negotiation in the 1980s, when it was presented as a straightforward economic analysis. Assuming the other side was acting rationally in trying to maximize its position, the goal was to figure out how to respond in various scenarios to maximize one's own value. Research beginning in the '90s, however, found that negotiators rarely acted rationally, instead taking into account what they felt they deserved from the other side, and what they could do to save face when they didn't get it.
“What we teach is not to settle for something that is just OK”
Take this simple exercise: Player A is given $20 and has to decide how much to share with Player B. Player B's only decision is to decide whether or not to accept what is offered. If accepted, Player B receives the offered amount and Player A gets to keep the balance. But if declined, both players end up with nothing. Rationally, B should take any offer—even as little as $1—that's more than nothing. And yet, whenever this experiment is performed, B consistently rejects the money unless it is at least a quarter of the total—$5.
"There is a very strong emotional response to the lack of fairness, irrespective of the right rational decision," says Wasynczuk. "The more we understand how people behave based on emotions, the more thoughtful and appropriate we can be in how we respond to them."
Anger, for example, is one of the most destructive emotions during negotiation—often causing deal making to break down as each side sacrifices its needs in order to save face. "It tends to start rising on both sides, and inevitably there is a point where it erupts," says Wasynczuk. "People walk away and say there's value on the table, but I don't care."
That said, anger isn't always a bad variable in negotiation. Deployed the right way, it can demonstrate passion and conviction that can help sway the other side to accept less. The trick is to direct the anger at the situation or problem—not the person on the other side of the table.
"Some students try and have a poker face and not react to the other side's offer, but that's not useful," says Wasynczuk. "If one side puts a ridiculous offer on the table, it's all right to get angry and say, 'I don't see how that would ever work.'"
On the flipside, research has found that entering negotiations with a positive attitude tends to lead to better outcomes—when both sides are agreeable and conciliatory, it builds a level of trust that can lead to information sharing that allows both sides to get a better deal. Happiness can be dangerous as well, since happy negotiators tend to accept less than they might otherwise be able to get.
"You don't want your happiness to hijack other emotions," says Wasynczuk. "What we teach is not to settle for something that is just OK, but to keep searching for something where both sides are going to benefit."
No matter what emotions are present at the bargaining table, a smart negotiator first becomes aware of what they are—and then works to emphasize the positive emotions that can help the deal and downplay the negative emotions that might scuttle it. Such "emotional intelligence" may take the form of changing body language or tone of voice to influence the way the other person responds—or taking a break during a difficult point in negotiations in order to turn down the heat when anger starts flaring.
In the case of client Kate and electrician Peter, what Kate doesn't realize is that while she is annoyed at her lack of phone and Internet access brought by the power outage, Peter has been working 18-hour days since the storm, and dealing with multiple homeowners all making similar demands, putting undue pressure on his small work crew.
A Happier Ending
In an "alternate ending" to the story, Kate apologizes for how the negotiation has gotten out of control, and asks if they can start over. She shares her own anxieties and frustrations about an important conference call regarding FDA approval of a cancer drug, and Peter shares that his uncle died of cancer. Before long, the two are sitting at the table discussing whether Peter can split up his crew to handle the most pressing repairs for each of his clients.
"In that second version, she is being more transparent with her frustration and fears and reaching out whenever there is a reaction from him," says Wasynczuk. "That empathy leads them to understand some of the differences that motivate each side and makes them feel like they want to do something with the other person."
As that case illustrates, emotions can be powerful, not only in derailing a negotiation, but also in helping both sides come to better agreement.
"To strip away emotions wouldn't be desirable," says Wasynczuk —even if it could be done. "Emotions are an expression of how people are processing information, and can give a strong signal of how the mind is internalizing the discussion."
Managed well, they can turn a frustrating negotiation into one that is pleasant, productive, and even enjoyable.