Psychological Tendencies in Commercial Negotiations

We are hardwired for fast reactions based on intuition and emotion, rather than thought and reason. In ancestral times, this was crucial. Spending time thinking when faced with a vicious predator, could be dangerous. Even in modern times, more often than not, these reactions are beneficial. Intuition is however fickle, emotions can get out of control and feelings can be manipulated. In commercial negotiations, it’s best to adopt a more rational approach. This requires awareness of psychological tendencies that may lead to misjudgements in negotiations, including the following.

Reciprocation: We are social animals and tend to repay in kind what others have done for us. We make concessions to people who have first made concessions to us. Before you make concessions, consider the merits of the matter and what you want to achieve. On the other hand, it is very hard to move negotiations along unless you are willing to make concessions. The skill is in conceding points which won’t hurt you, to build up the tendency in the counterparty to grant you favours on key points. This requires experience and judgement to identify the key points and deal with the negotiation in an order and manner which facilitates the desired outcome.

Doubt-Avoidance: We are programmed to remove doubt by quickly reaching decisions. This is especially true when under stress of negotiations. It may be better to reserve your position and revert at some future time. Resist the temptation to agree points to remove doubt. On the other hand, repeatedly reserving your position is unlikely to allow negotiations to progress. Again, it is important to have the experience and judgement to identify important issues and if these are not satisfactorily dealt with, to reserve your position rather than agreeing to an unsatisfactory outcome.

Reason Respecting: When people ask for a favour, we are more likely to comply if they give us a reason, even if we don’t understand the reason or it is wrong. We respect reasons and have a need to make sense of explanations. It’s important to give reasons when requesting something in the course of a negotiation. Conversely, don’t just accept reasons. Interrogate the logic behind a given reason.

Consistency: Once we have made a commitment, we want to remain consistent. We want to feel that we’ve made the right decision to preserve our self-image and we want to avoid the embarrassment of changing our minds.

Psychological tendencies working together

You can really get into trouble where two or more of these psychological tendencies combine and pull you in the wrong direction. For example, to avoid doubt under stress of a negotiation and on the strength of a dubious reason, you may quickly concede a point and then, to remain consistent, agree to a number of subsidiary points which are also unfavourable to you. Despite your misgivings, you don’t revisit these issues, because to do so would embarrass you in front of your colleagues.