At the core of Entrepreneurs' Organization (EO)'s mission is an unrelenting commitment to helping entrepreneurs learn and grow in every stage of business. Negotiating--whether with customers, employees or other companies--is a critical entrepreneurial skill that can make or break business success. Dr. Gleb Tsipursky, CEO of Disaster Avoidance Experts, author of Never Go With Your Gut, and a recent EO 360° podcast guest, empowers leaders to avoid business disasters by addressing potential threats, maximizing unexpected opportunities, and resolving persistent personnel problems. We asked Gleb about common pitfalls in the negotiation process. Here's what he shared:
Negotiators, even professional ones, make a surprising number of wrong decisions that doom negotiations which may otherwise have succeeded. Many such mistakes relate to overestimating how well they can deduce the feelings and thoughts of other parties in the negotiation, as well as the extent to which the other party can read their feelings and thoughts.
The illusion of transparency
Research shows that negotiators who sought to conceal their desires did a better job at it than they thought they did. In turn, those who tried to convey information to those they negotiated with about their preferences overestimated their abilities to communicate such knowledge. And negotiators with less power are more prone to such mistakes than those with more power.
Scholars call this erroneous mental pattern the illusion of transparency, referring to how people overestimate the extent to which others understand us and how well we grasp others. This mental blind spot is one of many dangerous judgment errors--what scholars in cognitive neuroscience and behavioral economics call cognitive biases--that we make due to how our brains are wired.
We make these errors not only in professional matters but also in our personal lives, as a recent survey by a shopping comparison website found. Fortunately, you can use pragmatic strategies to address dangerous judgment errors, whether in your professional life, your relationships, or other areas of life.
A real-life scenario
I observed a clear instance of illusion of transparency when an electric company brought me in as a consultant to mediate in failing contract negotiations between the management and the union. Both sides believed the other party to be unwilling to negotiate in good faith, asking too much and giving too little. The union demanded substantial wage hikes, strong job protection and better retirement benefits, while the management pushed back firmly on each request.
Quickly, I noticed that the illusion of transparency gravely inhibited progress. My private conversations with representatives from both sides showed that all felt they communicated their positions effectively, both in the areas where they wanted to stand firm and where they felt willing to compromise. In my conversations, both sides showed many areas of agreement and flexibility that neither side recognized.
Why didn't both sides outline their positions clearly, so that the other side understood precisely where they stood? Because they were afraid that the other party would take advantage of them if they stated their true positions, including the minimum they'd be willing to accept.
So both sides tried to convey what was most important to them by arguing more strongly for certain points and less strongly for others. They believed that the other side would "get the hint." Unfortunately, neither side "got the hint" about the true priorities of the other side.
Here's how the stalemate was resolved: I asked each side to use the decision-making strategy of weighing their priorities. After deploying this strategy, the union negotiators assigned first priority to increased job protection, second to better retirement benefits, and third to a large wage increase. The management negotiators assigned first priority to no wage increase, second to decreased retirement benefits, and third to weaker job protection.
By clarifying their priorities, the parties were able to find room for negotiation. The final contract included much-strengthened job protection, a moderate boost to retirement, and a small wage hike.
The management appreciated the outcome since it didn't have to spend as much money on labor. The union membership liked the peace of mind that came with job protection, even if they didn't get the wage hike they would have liked.
How to negotiate better in the future
The three key takeaways to remember for improving your future negotiations are:
- In any negotiation situation, you're very likely to overestimate the extent to which you explained your position to the other party.
- You're also probably too confident about how well you understand the other party's perspective.
- The other party is most likely making the same mistakes regarding you.
An easy way to address these problems is to use the decision-making strategy of weighing your priorities and asking the other party to do the same. Then, trade off your lowest priorities against their highest ones and vice versa. This will enable you to come to a win-win agreement where both parties realize significant gains and experience minimal losses.