Last summer, Margaret was sitting in her office when she received an email from her dean about a recent change in how her teaching credits would be computed. The provost (the dean’s boss) wanted to create consistency across the university between the number of student contact hours in a course and the amount of course credit a faculty member received. And so from now on, the credit for all short courses would be reduced from 0.6 to 0.5 credits per course. Margaret was required to teach 3 units of courses per year as her regular teaching load. This seemingly innocuous memo meant that instead of teaching five courses, she would now have to teach six.
That got Margaret’s attention. She immediately requested a meeting with the dean. She prepared questions and a couple of proposals beforehand, and at the meeting, she asked the dean to go into more detail about the reason for the change. He said he was simply complying with the provost’s requirement for a common way of equating teacher course credit and student contact hours.
This gave Margaret the opening she needed. She had information that the dean did not have. The sessions in her short courses invariably went longer than their allotted time—creating a problem for students who expected each class to end on time. At first, she had seen this as a cost associated with teaching experiential courses. This had just been a problem for her students and, to a lesser extent, for Margaret. But after she received the dean’s memo, she saw that she now had an opportunity. She was teaching more credits’ worth of course time than her schedule reflected.
Margaret presented this information to the dean and then suggested another—better—solution. She proposed that the dean increase the scheduled class time (to reflect what was really happening) rather than reducing her teaching credit per course. The dean readily agreed to this proposal, and her course load went back to five courses.
There are over a hundred faculty members in the Stanford Business School—yet no one but Margaret saw this email as an opportunity to negotiate, as a problem to be solved. Why was she the only one? What is it about the situation that led her colleagues to give in despite all their complaining in the hallways? One explanation is that they did not see this exchange as the start of a negotiation. They did not think about creating a better outcome. After all, this was a decision handed down from the provost’s office.
If you are like Margaret’s colleagues, you probably think that negotiating is appropriate in only a limited set of situations. You negotiate only when a lot of money is involved, but you don’t realize that the more common activities of daily life often give you chances to get more of what you want. For instance, you might be willing to negotiate over a car or a home purchase or when a contractual relationship is at stake, as in a new job. Yet even in these situations, some people just accept what is offered. Certainly, few people realize that shopping at a department store is an opportunity to negotiate. This was exactly the mindset of Margaret’s colleagues. They might haggle over compensation but not over a small change in allocating course credits—no matter what the consequences.
To take an even more mundane example, consider meetings. Almost everyone attends meetings, whether at work or in your community. You are asked to attend the meeting. Why? The most common reason is that you have resources—both tangible and intangible—and the person who called the meeting wants access to them. Maybe those resources are your time, your expertise, your political capital, financial contributions, or your support. Why do you attend? Because others have resources to which you want access. They may have expertise, attention, or control of resources that you want. The formal agenda may be to prepare a presentation for a senior manager or to organize a volunteer effort, but the context of these meetings is about negotiating—which of your scarce resources will you contribute and what do you hope to gain by working with your counterparts.
Sometimes the idea of negotiating over relatively mundane issues may be uncomfortable, particularly when the situation involves friends or family. However, your discomfort likely stems from looking at negotiation as a conflict with winners and losers—a conflict in which anything you gain comes at the expense of someone else. Of course this causes discomfort, because most people consider this way of looking at things to be incompatible with close relationships.
But what if you thought about negotiating as solving a problem? Instead of thinking about negotiation as a zero sum game where I get more and you get less, think about negotiation as a situation in which two or more people decide what each will give and receive through a process of mutual influence and persuasion, by proposing solutions and agreeing on a common course of action.
This broader definition of negotiation—as a response to disputed or scarce resources—lets you see opportunities to negotiate where once you saw none. And this perspective may ease another concern—the fear that if you negotiate, others will think you are greedy, demanding, or unpleasant. Who wants to be known as someone who always demands more or wants special treatment?
If all you do is demand more when you face resource scarcity, then your concerns are well-founded. But that is exactly our point. Seeing that negotiation is a way of finding solutions that are better for you (and to which your counterparts can agree) will help transform your negotiations from simple demands for more into exchanges in which you can solve your counterparts’ problems, as well as your own.
The first challenge is deciding when to accept the status quo and when to negotiate—and how to tell the difference. Let’s start with the easy one first: when should you not negotiate?
WHEN NOT NEGOTIATING MAY BE THE RIGHT CHOICE
Negotiating takes time—you need to think, gather information, and strategize. So, the easy answer is not to negotiate when the costs of negotiating exceed the potential benefits. If you are selling your car, and are in no particular hurry, you might prefer to set the price and wait for a buyer rather than waste time haggling with people who might never get to that level. Or just think about how long it would take to shop if everyone in the checkout line attempted to negotiate the price of every item.
You also might avoid negotiating because you consider the issue at stake too important to risk having your counterpart walk away. A good example is Thomas and Margaret’s search for their first academic positions. Thomas interviewed with a large number of schools and received nine offers, while Margaret interviewed with fewer schools and received only one. Thomas negotiated his salary, while Margaret did not. Margaret feared that any attempt to negotiate with her first employer, the University of Arizona, might make the university back out, so she signed the offer and sent it back by express mail.
Why was Thomas so willing to incur the risk of rejection while Margaret was not? The biggest difference was that Thomas had eight other options while Margaret had none. As an extreme example, consider a situation in which an armed stranger tells you, “Your money or your life!” Even Thomas would not consider this a first offer in a negotiation. Rather than countering, “How about half my money and I get to keep my life?” Thomas would hand over his money. Beginning in Chapter 2, we explore how having—and not having—alternatives changes how, what, and whether you should negotiate.
Just as you might not negotiate because the stakes are too great, you might also forgo negotiation because the benefits are too small. Take the grocery store example. You might choose not to negotiate because even a generous assessment of the potential benefit would be dwarfed by the cost of your time, the ill will of those behind you in line, and, perhaps, your own stress at acting like this in public.
The final reason for avoiding negotiations is lack of sufficient preparation. If you lack the time, inclination, or resources to plan, you may be better off avoiding negotiations. Sometimes, however, when a chance to negotiate takes you by surprise, it’s a sign that you have not thought far enough ahead. Sometimes students have confessed that, when talking to an employer, in what they thought was an early stage of the process, they were caught completely flat-footed when the recruiter asked: “So what would it take to get you here?” Perhaps the question was unexpected at that moment, but it was clearly something any job candidate should expect. Most likely, the candidates did not want to think about the answer because it would make them embrace rather than avoid the opportunity to negotiate.
One of the main factors that distinguish successful negotiators is the quality of their prenegotiation planning. The better prepared you are, the more control you will have; you will be much more capable of predicting what your counterpart wants and coming up with creative solutions. In short, preparation can turn a negotiation into a winning situation in which you and your counterpart search for a solution that makes you both better off—and allows your counterpart to say yes. (If you need to get more insight into how to prepare for a negotiation right now, you might want to jump ahead to Chapter 5.)
CHOOSING TO NEGOTIATE
How do people choose to negotiate—and how should they choose? The answers to these two questions do not always align. Consider two sisters who reach for the last orange in the fruit bowl. They both want it, but only one can have it, so they argue over who deserves it. If they are like most siblings, the solution is straightforward. They compromise. One sister cuts the orange into two pieces, and the other one gets to choose her half. Both sisters get a quick solution, although each only gets half of what she wanted.
If each sister had taken the time to uncover why the other wanted the orange, however, a very different solution might have presented itself. After they split the orange, one sister takes her half and squeezes the juice to make a smoothie while the other sister peels the zest for her icing. They both could have gotten more of what they wanted if they had taken the time to find out what the other one wanted.
Sometimes, choosing the easiest compromise can actually make you worse off. This is a classic—and often disastrous—shortcut, and it’s by no means the only one. When trying to assess whether you want to initiate negotiations, you may find yourself relying on another common shortcut: the search for confirming evidence.
Our own psychology can be our greatest enemy. Humans dislike uncertainty because predictability increases our sense of control. Everything you have observed, been taught, and learned from experience creates a series of personal theories about how the world works, why things happen, and why people behave the way they do. When you encounter information in your environment that supports these theories, you feel good. When information appears to refute your personal theories, however, it can be deeply upsetting.
To avoid having their theories about the world shattered, people develop a “confirmation bias.” This is the tendency to interpret information in a way that confirms their preexisting theories.
Confirmation bias is a huge problem; indeed, it prevents many people from negotiating in the first place. For example, if you don’t believe that negotiating is even an option, your confirmation bias will keep you from even trying to negotiate—even if negotiating were, in reality, a completely legitimate choice. Many people believe that negotiation creates conflict and that conflict is to be avoided unless the benefit is significant. This reluctance to negotiate, combined with natural confirmation bias, leads people to miss valuable negotiating opportunities.
Of course, the search for confirming evidence works both ways. If you love to negotiate, you may overestimate the benefits and underestimate the costs. Objectively, you might not want to incur the reputational costs of becoming one of those people who’s always trying to get more. If your confirmation bias leads you to negotiate too often, you’ll probably want to think long and hard before initiating new negotiations.
Confirmation bias is not the only psychological mechanism that prevents people from negotiating; gender plays a role, too. Ample evidence suggests that women are less likely than men to initiate negotiations. This is perhaps best illustrated by Linda Babcock and Sara Laschever in Women Don’t Ask: Negotiation and the Gender Divide.1 The authors found that in a survey of Carnegie-Mellon MBA students, male graduates received starting salaries 7.6 percent higher than those of their female counterparts. At first glance, most of us will reach a conclusion—perhaps resulting from confirmation bias—that the study confirms what we already know: that on average women are paid less than men for equal work.2 But that outcome could be achieved in two different ways. Companies could actively discriminate against women. Or women and men could behave differently once they get an offer.
It seems likely that both tendencies are to blame. When the participants in this survey were asked whether they attempted to negotiate a higher salary, only 7 percent of the women said they had, compared to 57 percent of the men. What may be surprising is that the authors found no differences in the success rates of the male and female MBA graduates who attempted to negotiate their starting salaries. Those who did negotiate (mostly men) successfully increased their starting salaries by 7.4 percent on average: almost precisely the difference between the men’s and women’s starting salaries. Clearly, had male and female MBA graduates attempted to negotiate higher salaries in equal numbers, that 7.6 percent difference in starting salaries would have been dramatically reduced.
Women tend to pass up other, less obvious opportunities to negotiate. In the 2006 U.S. Open, a new instant-replay system allowed the players to challenge line calls. Challenges by both male and female players were upheld approximately a third of the time. However, in an equal number of U.S. Open matches, the men challenged seventy-three calls, compared to only twenty-eight by women.3 Although it is conceivable that referees might be more accurate in judging women’s tennis than men’s, another hypothesis is difficult to ignore: that women—even the most highly skilled, professional tennis players—are less willing to ask for more when this means asking for reconsideration of a referee’s call. Calling into question a referee’s call creates a conflict, and women may see such behavior as inconsistent with their sense of good sportsmanship.
Being female is obviously not the only factor that prevents people from negotiating. Ninety-three percent of women did not ask for a higher salary, but there were also plenty of men who did not ask either. Regardless of your gender, you may fear that asking for a different package will make you look greedy or demanding. So you might accept the first offer you’re given; after all, those who did negotiate only got an additional 7.4 percent, and that benefit may not be worth the potential reputational cost (or risk of having your offer rescinded, as uncommon as that may be).
Yet that small difference in starting salary can grow into a significant difference over time. To give you an idea of just how big, suppose that two equally qualified thirty-year old applicants Chris and Fraser receive identical salary offers from the same company for $100,000 per year. Chris negotiates a 7.4 percent salary increase to $107,400, while Fraser accepts the initial offer of $100,000. Both stay at the company for thirty-five years, receiving identical 5 percent annual raises each year.
If Chris retires at sixty-five, Fraser would have to work for an additional eight years to be as wealthy as Chris at retirement. Consider that for a minute. The only distinction between the compensation that Chris receives and the compensation that Fraser receives is that initial 7.4 percent increase that Chris negotiated.
And this is a conservative estimate. That eight-year figure reflects a scenario in which the company gave Chris and Fraser exactly the same percentage increase each year. But what if the company treated them differently, precisely because Chris commanded a higher salary than Fraser? A simple metric for one’s value to an organization is how much one is paid, so the company will consider Chris more valuable. More valuable employees get better raises. Changing Chris’s raise to 6 percent a year compared to Fraser’s 5 percent would mean that, by the end of thirty years, Chris is earning $100,000 more per year than Fraser. This will require Fraser to work an additional four decades after Chris retires. Now are you reconsidering the benefits of negotiating?
This example highlights the cost of Fraser’s one-time decision not to negotiate, a decision that may have seemed inconsequential when Fraser made it. But Fraser will be feeling the effects of that decision for decades. While we do not propose that you negotiate every social exchange, you should consider the long-term cost of not negotiating.
It’s not outrageous to suppose—as in this example—that your employer’s assessment of you may be influenced by how much you are being paid! In a recent study, researchers served two glasses of the same wine, but told participants that one cost $45 and the other $5. The subjects not only reported enjoying the $45 glass of wine more, but the part of the brain that experiences pleasure became significantly more active when drinking it as compared to the brain activity when drinking the $5 glass of wine. These researchers documented both that price implied quality and the fact that the higher (perceived) price of the wine changed the nature of the individual’s experience on a biological level.4 Clearly, your boss’s assessment of your performance should be far more complex than your assessment of wine quality, but this experiment suggests that you—and your boss—may judge your value more highly the more expensive you are!
What do the tennis example, the wine tasting, and your willingness to negotiate all have in common? Your outcomes are affected by your expectations. You expect the expensive wine to be more enjoyable than the modest wine, and that expectation changes how you experience it. Similarly, being concerned that others might perceive you as too demanding, greedy, or unpleasant can result in your censoring your behavior—whether that is challenging a referee’s call or initiating a negotiation.
Your environment and your experience combine to set your expectations. Different cultures have different norms about when it’s appropriate to negotiate. Americans tend to view primarily nonroutine, expensive interactions as negotiable while people from the Middle East extend their boundaries to include all sorts of transactions, big (organizational mergers) and small (market purchases). These are examples of cultures that are country or region specific. But in these situations the behavior of people much closer to you—such as family members, mentors, and role models—also sets your expectations. If your mom or dad were willing to negotiate, even in places where it wasn’t typical, such as a fancy department store, you would see a shopping excursion in a much different light than if your parents viewed asking for a better deal as unacceptable or inappropriate.
Based on whatever mix of these factors you have experienced and observed, you probably have a pretty firm idea of what to expect in a negotiation. Yet because those expectations can motivate or handicap your performance, it’s crucial to understand how they work—and how you can use them to your advantage.
THE POWER OF EXPECTATIONS
Expectations are powerful because they are the goals you set for yourself. If you set your expectations too low, you will not do as well as you could. If your expectations are extreme, you may not meet them—and you will likely feel disappointed. What is important here is performance. The goal of setting a goal is not to achieve the goal but to improve performance. Setting expectations sets the standard to which you aspire. One of the biggest changes that you could make to get more of what you want is to set higher expectations, even if you don’t achieve them. Setting higher expectations will change your behavior—and can lead to better performance.
Expectations are so powerful, in fact, that the expectations of others—even if we are ignorant of them—can affect how we perform. One famous study demonstrated what came to be known as the Pygmalion Effect: elementary school teachers unconsciously behaved in ways that encouraged or discouraged the success of their students.5 More recently, researchers have investigated another psychological phenomenon called stereotyped threat: the concern people feel about confirming a negative stereotype about the group to which they belong, producing anxiety, lowered expectations, and reduced performance.6
An example of how stereotypes affect performance can be seen in the common stereotype that white athletes are successful because they are smart (sports intelligence) while black athletes are successful because they are athletic (natural sports ability). When white and black athletes played golf after being told that performance reflected their sports intelligence, black athletes underperformed white athletes. When told that performance reflected natural athletic ability, white athletes underperformed.
If you play golf, you may not be persuaded; there are lots of things that can put you off your game. You probably do not feel the same way about math, however. Consider Asian females, who fall under two conflicting stereotypes: “Asians are good at math” and “females are bad at math.” To test this, researchers primed two different groups of Asian females to one of the two stereotypes: bad or good in math. When the students had to specify their gender, thereby invoking the I-am-bad-at-math threat, they scored significantly worse on the math test than did their female counterparts who, by identifying their ethnicity, invoked the I-am-good-at-math stereotype which did not generate threat.7 Merely identifying their gender was enough to create a stereotyped threat and inhibit the Asian women’s ability.
Expectations, whether they are set by ourselves or by others, can drive behavior. Think about this: before making pay decisions managers learned that they might have to explain why they gave the raises they did. They assigned lower raises to women than to equally performing men.8 These managers seemed to change their allocations based on what they expected: men would ask for more—but not all men. Some were satisfied with the raises they received. So to keep as many men out of their offices asking for more, they may have given them higher initial raises. In contrast, managers expected that women would simply accept the raises without question. So they preemptively gave the men more. It is little wonder, then, with this cycle of diminished expectations both from employers and their female employees that women make substantially less than men in equivalent positions with equivalent qualifications.
Changing this cycle requires a starting point—namely, changing your expectations about what is possible in a negotiation. After all, if you don’t expect to achieve much if you do ask, it is not surprising that you don’t ask or you ask for substantially less. The more uncertain you are about the correctness of negotiating, the more likely you are to accept less than you might have received if you had made the attempt.
A study at one of the country’s top business schools revealed just how vital a role expectations play in determining compensation. The study revealed that female MBA graduates of Harvard Business School (HBS) accepted starting salaries some 6 percent lower than their male counterparts, after controlling for the industries they entered, pre-MBA salaries, functional areas of expertise, and cities of employment. Even worse, female HBS MBAs accepted yearly bonuses approximately 19 percent lower than their male counterparts. The main determinant of their salaries and bonuses, it seems, was their expectations. The more ambiguous their expectations, the bigger the discrepancy between male and female graduates. But when expectations were equated by providing information about current salaries and bonuses, the negotiating behaviors and the resulting outcomes were the same for both men and women. Similar expectations lead to similar results.9
Another study demonstrated just how powerful expectations—especially negative expectations—are in affecting the ability to negotiate. In this study, equal numbers of male and female participants were divided into two random groups. The first group was told that negotiators achieve bad outcomes when they rely on a selfish, assertive, or bullying negotiating style, hyper-rational analysis of the other’s preferences, and limited displays of emotion—all stereotypes of male behavior. The second group was told that they would produce bad results if they expressed their interests only in response to direct questions, relied on their intuition or listening skills to move the negotiation forward, or displayed emotion—all negative female stereotypes.10
After being primed with those suggestions, participants listed their expectations about how they would perform in the negotiation. When exposed to the negative male stereotype, male negotiators expected to perform significantly worse than their female counterparts. When exposed to the negative female stereotype, female participants expected to perform significantly worse than their male counterparts.
Not surprisingly, these expectations strongly correlated to the participants’ actual performance in the negotiations. Male negotiators outperformed female negotiators when both were exposed to negative female stereotypes, and female negotiators outperformed males when both were exposed to negative male stereotypes.
The lesson of these studies is clear; if you want to change the way you negotiate, experience wine, determine an acceptable compensation package for a position, or perform on math tests, it is critical that you set appropriate expectations for each scenario. Doing so will give you a decided advantage in getting more of what you want—be it a higher salary, a more satisfying glass of wine, or a better test score.
SUMMARY
Every day, you have opportunities to negotiate. Most people miss these chances to get more of what they want because they have a narrow understanding of when it is appropriate to negotiate. To take advantage of these opportunities, you need to broaden your horizon of what is and is not negotiable.
Situations of resource scarcity and social conflict are especially good opportunities for negotiation. When confronting such scenarios, assess whether you could negotiate to get more of what you want.
The key takeaways of this chapter are:
• The benefits of negotiation can be applied to a wide variety of social conflicts, even though these conflicts may not initially resemble typical negotiation opportunities.
• It is important to assess each potential negotiation carefully. Even though there are many opportunities to negotiate that could make you better off, consider the costs that you may incur if you try to negotiate.
• Even when you see an opportunity to negotiate, your discomfort with negotiation may result in your overweighting the costs and underweighting the benefits of negotiating. Beware of confirmation bias: if you feel uncomfortable with negotiation, you will generally be blind to the opportunities around you. Discount that discomfort accordingly.
• Expectations drive behaviors. If you set high expectations for your negotiating, you will do better. You may not reach the standard that you set, but remember that the primary goal of a negotiation is to achieve a better deal, not reach your own benchmarks. Setting higher expectations results in better performance, even if you don’t actually achieve all your expectations.