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10/06/2020

MGMT20011 Business Negotiations Day6 Perception,cognition& emotions

www.fbe.unimelb.edu.au

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Perception, Cognition and Emotion in Negotiation

The basic building blocks of all social encounters are: 1. Perception; 2. Cognition (framing and cognitive biases) 3. Emotion.

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I.Perception • Theprocessbywhichindividualsconnectto theirenvironment • A“sense‐making” process • Usingshort‐cutsreducesaccuracy

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Perceptual Distortion • Four major perceptual errors: 1. Stereotyping 2. Halo effects 3. Selective perception 4. Projection

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1. Stereotyping

• Is a very common distortion. • Occurs when an individual assigns attributes to another solely on the basis of the other’s membership in a particular social or demographic category • Can be about age, skin color, height, socio‐economic class, etc. • Example: Old people are conservative, this person is old and therefore is conservative

• Very hard to change

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Photo Source: Lake Clark National Park & Preserve

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Photo Source: Marcus Wong

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2.Haloeffects

– Occurwhenanindividualgeneralizesaboutmanyattributesof anindividualbasedontheknowledgeofonlyoneattribute – Morelikelytooccur: • Whenyouhavenoexperiencewiththeperson • Whenthepersonisfamous

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3. Selectiveperception – Theperceiversinglesoutinformationthatsupportsaprior beliefbutfiltersoutcontraryinformation • Ex)Aperson’sinitialsmilethatledyoutobelievethattheywere honest/cooperativemightalsoleadyoutodownplaytheir potentiallycompetitivestatements.

– Perpetuatesstereotypesorhaloeffects

4. Projection – Arisesoutofaneedtoprotectone’sownself‐concept – Peopleassigntoothersthecharacteristicsorfeelingsthat theypossessthemselves • Ex)I’mfrustratedaboutthiswhichmeanstheotherpartyis frustratedtoo

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II. Cognition Framing – Represent the subjective, subconscious mechanism through which people evaluate and make sense out of situations – How bargainers perceive ongoing sets of events in the light of past experiences

– Make sense of complex realities; – Lead people to pursue or avoid subsequent actions;

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Examples of Frames • Substantive: • What’s the conflict about?

• Outcome: • Do I expect a specific result/outcome?

• Aspiration: • Do I tend to think more about a broader set of interests or needs?

• Process: • How will the negotiations proceed?

• Identity: • Who am I?

• Characterization: • How do I see the other party?

• Loss-Gain: • How do I see the risks/costs/rewards associated with outcomes? Do I focus on what I gained or what I lost?

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How Frames Work in Negotiation • Framing is a subconscious process. But during the integrative negotiation process, by making it conscious, you try to find better solutions and solve conflict. We are also trying to reframe thinking of other party (anchoring) • Negotiators can use more than one frame; – Mismatches in frames within and between parties are sources of conflict;

• Parties negotiate differently depending on the frame; – Specific frames may be likely to be used with certain types of issues; – Particular types of frames may lead to particular types of agreements

Parties are likely to assume a particular frame because of differences in personality, power , background and etc.

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Parties in conflict often use one of 3 broad frames: • Interests frame: • People talk about their “positions” but often what is at stake is their underlying interests

• Rights frame: • People may be concerned about who is “right” – that is, who has legitimacy, who is correct, and what is fair

• Power frame: • People may wish to resolve a conflict on the basis of who is stronger

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The Frame of an Issue Changes as the Negotiation Evolves Reframing: Frames are reshaped as party’s talk to each other • Negotiators tend to argue for stock issues or concerns that are raised every time the parties negotiate; • Each party attempts to make the best possible case for his or her preferred position or perspective at the beginning;

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CognitiveBiasesinNegotiation Systematicerrorsthatnegotiatorsmakewhenthey processinformation: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

Escalationofcommitment Mythicalfixed‐piebeliefs Anchoringandadjustment Issueframingandrisk Informationavailability Thewinner’scurse Negotiatoroverconfidence Thelawofsmallnumbers Self‐servingbiases Endowmenteffect Ignoringothers’cognitions Reactivedevaluation

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1.IrrationalEscalationofCommitment • Negotiatorsmaintaincommitmenttoacourseofactioneven whenthatcommitmentconstitutesirrationalbehavior • Onceacourseofactionisdecided,negotiatorsoftenseek supportive(confirming)evidenceforthatchoicewhile ignoringdisconfirmingevidence • Desireforconsistency – Noonelikestoadmiterrororfailure

• Haveanadviserserveasacheck‐point

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2.MythicalFixed‐PieBeliefs • Negotiatorsassumethatallnegotiations(notjustsome) involveafixedpie • Canvarydependingonfocusofthenegotiator:valuesvs. personalgain • Inadditiontoinventingoptionsbyredefiningtheproblemset (recallchapter3),negotiatorscandiminishfixed‐pie perceptionsby: – Focusingonunderlyinginterestsratherthanmerelyontheissues beingnegotiated

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3.Anchoring&Adjustment • Theeffectofthestandard(anchor)againstwhich subsequentadjustments(gainsorlosses)are measured • Theanchormightbebasedonfaultyorincomplete information,thusbemisleading • Thoroughpreparationplusadevil’sadvocatecan helppreventerrorsofanchoringandadjustment

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4.IssueFraming&Risk • Framescanleadpeopletoseek,avoid,orbeneutral aboutriskindecisionmakingandnegotiation • Peoplearemorerisk‐averse whenadecision problemisframedasapossiblegain,andrisk‐ seeking whenitisframedasaloss • Innegotiationsyoumustavoidthepitfallsofbeing framedwhilesimultaneouslyunderstanding positivelyandnegativelyframingyouropponent

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5.AvailabilityofInformation • Availabilitybiasoperateswheninformationthatis presentedinvivid,colorful,orattention‐gettingways becomeseasytorecall – Informationthatispresentedthroughaparticularlyclear message,diagram,orformulawilllikelybebelievedmore readilythaninformationpresentedinaconfusingdetailed format,regardlessoftheaccuracyofeach

• Becomescentralandcriticalinevaluatingeventsand options

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6.TheWinner’sCurse • Thetendencytosettlequicklyonanitemandthen subsequentlyfeeldiscomfortaboutawinthatcomestoo easily(rememberdistributivebargaininglecture) • Preventfromoccurringinthefirstplacebydoingtheadvance workneededtoavoidmakinganofferthatisunexpectedly acceptedbyinvestigationandpreparation

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7.Overconfidence • Thetendencyofnegotiatorstobelievethattheir abilitytobecorrectoraccurateisgreaterthanis actuallytrue • Cansolidifythedegreetowhichnegotiatorssupport positionsoroptionsthatareincorrector inappropriate • Canleadnegotiatorstodiscounttheworthorvalidity ofthejudgmentsofothers

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8.TheLawofSmallNumbers • Thetendencyofpeopletodrawconclusionsfrom smallsamplesizes • Innegotiations,yourpastexperiencesdetermine yourfuturenegotiations • Thesmallersample,thegreaterthepossibilitythat pastlessonswillbeerroneouslyusedtoinferwhat willhappeninthefuture

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9.Self‐ServingBiases • Peopleoftenexplainbehaviorbymaking attributions,eithertothepersonortothesituation • Thetendency,knownasfundamentalattribution error,isto: – Overestimatetheroleofpersonalorinternalfactorswhen judgingother’sfailures – Overestimatetheroleofsituationalorexternalfactors whenjudgingownfailures

• IfImessupitisbadluck,ifyoumessupitisyour fault! • Thisbiascandamageanegotiationeffort. 24

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10.EndowmentEffect • Thetendencytoovervaluesomethingyouownor believeyouposses

• Canleadtoinflatedestimationsofvaluethat interferewithreachingagooddeal 25

11.IgnoringOthers’Cognitions • Negotiatorsdon’tbothertoaskabouttheother party’sperceptionsandthoughts • Thisleavesthemtoworkwithincomplete information,andthusproducesfaultyresults • Thedrivetoignoreothers’cognitionsisdeep‐seated anditcanbeavoidedonlyifnegotiatorsexplicitlytry

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12.ReactiveDevaluation • Theprocessofdevaluingtheotherparty’sconcessionssimply becausetheotherpartymadethem(andyoudon’tlikethem)

• Maybeminimizedbymaintaininganobjectiveviewofthe processby: – Maintainingobjectiveviewoftheprocess – Assigningacolleagueormediatortodothistask – Clarifyingeachside’spreferencesonoptionsandconcessionsbefore anyaremade

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Managing Misperceptions and Cognitive Biases in Negotiation Be aware they can occur, but it is not enough. The best advice that negotiators can follow is: • Be aware of the negative aspects of these biases; • Discuss them in a structured manner within the team and with counterparts.

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III. Emotions! • Emotionsareintensefeelingsdirectedinreactiontoaspecific personorevent • Negotiationscreatebothpositiveandnegativeemotions • Emotionscanbeusedstrategicallybyintentionallymanipulating emotioninordertogettheothersidetoadoptcertainbeliefsor takecertainactions

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PositiveEmotions • Positivefeelingsresultfrom: – Fairproceduresduringnegotiation – Favorablesocialcomparisonwithothersinsimilarsituations

• Positiveemotionsgenerallyhavepositiveconsequences – Theyaremorelikelytoleadthepartiestowardmoreintegrative processes – Theyalsocreateapositiveattitudetowardtheotherside – Theypromotepersistence – Theysetthestageforsuccessfulsubsequentnegotiations

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NegativeEmotions • Negativeemotionsmayresultfrom: – Acompetitivemind‐set – Animpasse – Theprospectofbeginninganegotiation

• Negativeemotionsgenerallyhavenegativeconsequences – define the situation as competitive or distributive; – escalate the conflict; or – retaliate and may thwart integrative outcomes.

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Negative motions can undermine a negotiator’s ability to analyze the situation accurately.

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Not all negative emotion has the same effect.

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TheEffectsofPositiveand NegativeEmotions • Positiveemotionsmaygeneratenegativeoutcomes – Negotiatorsmaybelesslikelytocloselyexaminetheotherparty’s argumentsandbecomesusceptibletodeceptivetactics – Ifunabletocometoanintegrativeagreementnegotiatorsarelikely toexperiencethedefeatmorestronglyandtreattheotherparty moreharshly

• Negativefeelingsmayelicitbeneficialoutcomes – Responsesdependontheappropriatenessoftheanger – Negativeemotionsalertsthepartiesthatthesituationrequires attentionandmaymotivatethemtotakeaction

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StrategicAdviceforDealingwithEmotions • Keepingacoolheadiseasiersaidthandone • Controllingemotionmayinterferewiththeprocessof entrainment • Emotionsarecontagious • Positiveemotionspromoteintegrativebargaining • Negativeemotionsmustbeconvincingtobeeffective • Timingofemotionmatters

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www.fbe.unimelb.edu.au ©CopyrightFacultyofBusinessandEconomics

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