Ethical Negotiation: Not an Oxymoron

The Carnegie Council interviews Hal Movius and Max Bazerman on how to help negotiators behave in more ethical ways

“In this second podcast in our collaboration with EthicalSystems.org, we examine negotiation. Turning again to behavioral science for insight, we learn that transparency and prioritizing joint gains can keep negotiations above-board, and might help companies avoid the pitfalls that beset Dell Computers a few years ago.”

See the full podcast series from the Carnegie Council:

NOTE: THIS IS AN ABRIDGED TRANSCRIPT.  FOR THE ENTIRE PODCAST, LISTEN HERE

By JULIA TAYLOR KENNEDY, AMBER KIWAN | MAY 20, 2015

JULIA TAYLOR KENNEDY: You’re listening to Impact from the Carnegie Council. I’m Julia Taylor Kennedy.  Each episode, we explore a topic in global business ethics. This time it’s negotiation.

HAL MOVIUS: Whenever you say negotiation, people bring to mind a very strong connotation of exploitation, deception, clever ruses, and difficult tactics.

I’m Hal Movius. I’m president of Movius Consulting.

JULIA TAYLOR KENNEDY: Movius is a negotiation consultant, and despite what he just said, he thinks negotiation is a wonderful process when it’s properly used. The first thing Movius does for potential clients is to reframe the term negotiation.

HAL MOVIUS: A definition I like is negotiation is “a process by which two or more parties—and there are almost always more—with compatible and conflicting interests try to reach agreement on a decision or transaction.”

JULIA TAYLOR KENNEDY: Unfortunately, many still define it another way—getting the best price or the best deal from the opposing party. And that kind of negotiation can be pretty intimidating.

Here’s a really common one: you have a long-term relationship selling a product to a buyer and then the buyer decides to pay 10 percent less for your product.

HAL MOVIUS: Exaggerated demands, threats, coercion—people saying things like, “There are plenty of other companies who would love to do business with us. Frankly, if you can’t come to our price, then I’m not sure how much we have to talk about today.”

JULIA TAYLOR KENNEDY: These hard-driving tactics can catch a supplier off-guard.

HAL MOVIUS: They think, “Gosh, okay, I’m stunned. They want 10 percent. Maybe I should counter with 5—I’ll just counter with 5.” Then you’ve immediately taught the other side that all they have to do when they want a concession is to demand one.

There has to be a different response. I need to become inquisitive and say, “Why is it that you need the 10 percent?”

Even then, people across the table who have learned hard-bargaining techniques won’t necessarily tell you, and you have to guess.

JULIA TAYLOR KENNEDY: Movius says this nuanced approach to negotiation is taught too rarely . . . and without it, negotiators act out of instinct or emotion.

HAL MOVIUS: People who are more relationally focused can become unnerved when they come across somebody who’s sitting on the other side of the table and seems to not give two hoots about the relationship—who just wants to get what they want at all costs. People need help managing their emotion and keeping their poise when they’re in a situation that is making them very uncomfortable.

JULIA TAYLOR KENNEDY: And because they’re uncomfortable, their best intentions to behave according to their values can go out the window. Instead, people start adopting the aggressive tactics they see across the table. And here’s where behavioral ethics starts coming into focus.

MAX BAZERMAN: I’ve long taught negotiations, decision-making, and now ethics by letting people see the mistakes that they make in their own behavior.

Max H. Bazerman, Jesse Isidor Straus Professor at the Harvard Business School and the co-director of the Center for Public Leadership at the Harvard Kennedy School.

JULIA TAYLOR KENNEDY: In his classes, Bazerman gives students and business executives exercises to show how their behaviors don’t fit their ethical codes.

MAX BAZERMAN: I certainly see a lot of students, a lot of executives who are fascinated by the fact that they did something that surprises them and they’re dramatically motivated to change.

JULIA TAYLOR KENNEDY: Because what Bazerman teaches his students—and what many of the executives he trains already know—is that negotiations never really end.

MAX BAZERMAN: We have repeated interactions with the same players and we have a reputation that’s at stake. If you thought about how do you develop a good, long-term relationship even if your goal is to make profit out of that long-term relationship, that seems highly dependent on the other side obtaining a good deal as well. Otherwise they’re simply going to move on to other alternatives than you at the next move.

JULIA TAYLOR KENNEDY: So in addition to making yourself or your organization happy with a negotiation, it’s also important to make the opposition happy.

MAX BAZERMAN: So often there are opportunities to create joint gains by trading across issues, by letting the other side have what’s most important to them where you get what you care most in return.

JULIA TAYLOR KENNEDY: For example, in a contract with a freelancer, the price of a service can come down if the volume of work goes up. Or in a contract with a factory supplier, the price can come down if there’s a long-term agreement in place.

Another way to understand joint-gains trading? A love story.

MAX BAZERMAN: Think about the romantic couple who on Friday night are arguing about where to go to dinner: party A wants restaurant A, party C wants restaurant C, and they compromise on B.

JULIA TAYLOR KENNEDY: And then over dinner they talk about which movie they want to see, and party A wants one movie and party C wants another, so they compromise on a third movie.

MAX BAZERMAN: And then when they’re going home they realize that party A cared much more about the dinner choice and party C cared much more about the movie choice.

JULIA TAYLOR KENNEDY: So if they had gone with one person’s favorite restaurant and the other person’s top pick for the movie, they would have both been happier in the end—instead of kind of disliking the food and the movie.

MAX BAZERMAN: And if you can imagine a romantic couple doing better by making wise trades across issues across time, I think you can begin to see any kind of long-term business collaboration or long-term diplomatic relationship as doing well when we can trade off issues both at a specific time but also across time to create more value for the two parties to divide. 

JULIA TAYLOR KENNEDY: Boy, I think you may have yet a third act as a marriage counselor.

MAX BAZERMAN: I think I’ll pass on that. My clinical skills are quite limited.

JULIA TAYLOR KENNEDY: Of course, in a negotiation, there’s always the fear that the other side is lying about their ideal outcome. How to avoid that? Back to open communication.

MAX BAZERMAN: Ask clear, direct questions. The more ambiguous the information the other side is giving to you, the more likely it’s going to be somewhat disingenuous. So more specificity, more clarity, will also increase honesty in any negotiation dialogue.

JULIA TAYLOR KENNEDY: Bazerman teaches all of these approaches in his negotiation classes. His students buy into the idea that negotiation is about long-term relationships, it’s about finding joint gains, it’s about open communication.

And yet they still resort to less enlightened tactics in their negotiation exercises.

MAX BAZERMAN: The goal is not to simply improve their intuition but to realize that so much of our behavior is driven by the environment.

JULIA TAYLOR KENNEDY: So how to change the environment to put these better behaviors in place?

HAL MOVIUS: One thing that doesn’t work is to simply tell people that they have to behave ethically, and then drop them down into an incredibly competitive and dynamic environment in which they’re going to have private negotiations with a counterpart and hope for the best. Good luck.

JULIA TAYLOR KENNEDY: Hal Movius has a few ideas of what could work.

HAL MOVIUS: People need a robust model of negotiation. I don’t mean that they need some theoretical, abstract idea about negotiation. They need a very practical process model based on the kinds of mistakes that negotiators are prone to making.

JULIA TAYLOR KENNEDY: In other words, first they need to take Max Bazerman’s class.

HAL MOVIUS: The second is that people need to practice being in that situation and managing their emotions and practice responding when difficult tactics are used.

JULIA TAYLOR KENNEDY: It’s a little like exposure therapy.

HAL MOVIUS: The third kind of intervention is that negotiators need far more guidance than they are currently getting—particularly in the corporate world—about what success means and how success is measured.

Negotiators rightly get confused when they’re given high-level values they’re meant to represent, but then very focused, specific measures which warp their behavior in certain ways. The job of leaders who manage negotiators is to provide them with some set of criteria that describes what it means to have a successful negotiation.

JULIA TAYLOR KENNEDY: Instead of being recognized for getting the best price or the shortest turnaround time on a product, negotiators could be evaluated by other criteria.

HAL MOVIUS: “Did the agreement improve in some way over last year’s agreement or the existing agreement in how well we met each side’s interests? And did we behave in a way that reflects the values of the organization or of our group in the organization?” That would be a more balanced scorecard beyond simply, in hard dollars, “How much revenue does this deal translate to?” or “How much of a discount did we get?”

JULIA TAYLOR KENNEDY: After all, the real goals of negotiation are to maintain a good reputation with current and future stakeholders, to consistently deliver on the agreement, and to be able to change agreements in good faith when business climates shift.

HAL MOVIUS: What I think is interesting about negotiation is that it’s a real moment of truth for organizations. You have a set of values and principles that the organization espouses, and then you have these urgent, financial, fiduciary, legal, and market imperatives.

It really is the crucible of capitalism. You are representing an organization, you’re trying to reach an agreement with another side, and there are all kinds of questions about what behaviors are acceptable and what behaviors are not acceptable in support of achieving critical goals.

JULIA TAYLOR KENNEDY: Thanks for listening to Impact from the Carnegie Council. As I mentioned earlier, this podcast was produced in collaboration withEthicalSystems.org where you can learn more about topics in behavioral ethics from top academics in the field.

A special thanks to our production team, Mel Sebastiani, Terence Hurley, Amber Kiwan, Deborah Carroll, and Chris Green. And thanks to the team at Ethical Systems, especially to Jonathan Haidt, Jeremy Willinger, Katharina Weghmann, and the late Bryan Turner. I’m Julia Taylor Kennedy.

You can find out more about this podcast at carnegiecouncil.org. You can also find us on www.policyinnovations.org, on iTunes, or wherever you download your podcasts.