From my Fast Company blog:
Negotiating well is a powerful skill, and it doesn’t come naturally to most people. That’s because a negotiation is an experience that is rife with conflicting motivations. When two parties haggle over price, the buyer needs to somehow reconcile his desire to pay the lowest possible price, with the knowledge that if he bids too low, the negotiation may break down and the seller could walk away.
These concerns are equally present when it comes to negotiations over salary – managers want to keep costs down, without losing their best people to better paying jobs. And employees want to get the highest possible salary, without overplaying their hand and getting canned, or simply humiliated, in the process.
The key to a good outcome in any negotiation is a strong opening bid, since that bid is the jumping off point, as well as the frame of reference, for the negotiation that follows. You are never going to end up paying less than your initial offer when purchasing a car, or making a bigger salary than you asked for when starting your new job. But a strong opening bid takes a certain amount of gutsiness – you need to overcome all those perfectly rational concerns you may have about taking things too far, only to end up embarrassing yourself and failing completely.
So how can you embrace risk, particularly when risk-taking doesn’t come to you naturally? The answer is simple: when you think about an upcoming negotiation, focus only on what you have to gain, and banish all thoughts of what you might lose.
Psychologists call this adopting a promotion focus. When we think about our goals in terms of potential gains, we automatically (often without realizing it) become more comfortable with risk, and less sensitive to concerns about what could go wrong. When we adopt a prevention focus, on the other hand, and think about our goals in terms of what we could lose if we don’t succeed, we become much more conservative and risk-averse.
These different ways of looking at the same goal (e.g., to pay the lowest price, to get the biggest raise) have profound effects on the way we approach negotiation.
In one study, psychologist Adam Galinksy and his colleagues divided 54 MBA students into pairs, and asked them to take part in a mock negotiation involving the sale of a pharmaceutical plant. One student was assigned the role of “seller” and the other “buyer,” and both were given detailed information about the circumstances of the sale, including the fact that the “bargaining zone” would range from $17-25 million dollars.
Galinsky then manipulated the goal focus of the buyers. Before the negotiation began, half were told to take a couple of minutes and write down “the negotiation behaviors and outcomes you hope to achieve… think about how you could promote these behaviors and outcomes,” giving the buyers a promotion focus. The other half were told to write down the behaviors and outcomes “you seek to avoid” and how they “could prevent” them, giving those buyers a prevention focus.
Each pair began their negotiation with an opening bid from the buyer. Promotion-minded buyers opened with a bid an average of nearly $4 million dollars less than prevention-minded buyers. They were willing to take the greater risk and bid aggressively low, and it paid off in a big way. In the end, promotion buyers purchased the plant for an average of $21.24 million, while prevention buyers paid $24.07 million.
Why? It turns out that approaching a goal with a promotion mindset helps a negotiator to stay focused on their (ideal) price target. A prevention mindset, however, leads to too much worrying about a negotiation failure or impasse, leaving the buyer more susceptible to less advantageous agreements.
This is one of those things that’s worth taking a moment to think about – two negotiators, each armed with identical information, facing similar opponents, and yet one overpays by nearly $4 million dollars. The only difference was that one negotiator was thinking about all that he could gain, while the other focused too much on what he had to lose.
So when you are preparing for your next negotiation, take a few moments to list all the ways in which you will benefit if you are successful. Repeat them to yourself just before the negotiation begins. Most importantly, shut out any thoughts about what could go wrong – just refuse to give them your attention. With practice, this thought-training will become easier, and eventually automatic. Risk-taking, believe it or not, can become second nature to you, if you think about your goals in the right way.