One of the most critical aspects for any negotiation is planning, which is a subject worthy of its own blog post. Part of the planning process includes assessing power and leverage of the parties who will participate in the negotiation. Power and leverage are not synonymous but are often articulated interchangeably. Who has more power in the negotiation? Who has leverage? How can that leverage be influenced?

Well, what’s the difference?

Power is the strength, ability or resources to do something or act in a particular way (subtext – a way that can also control other people or outcomes).

Leverage is having something that someone else wants or needs, and thus the ability to influence power (subtext – to impact other people or outcomes).

Consider the massive real estate developer who has successfully purchased all but one tiny home in the area designated for a client’s new medical research campus. That home is owned by a 80-year old woman (in good health, so she’s presumably not going anywhere) whose grandfather built the house, was raised there, and raised her own family there. She has communicated to the developer that there is no price they can put on that house. It’s simply not for sale. She’s just a “little old lady” and they are the big powerful developer. But she’s got the leverage.

Many of us are parents. As between us and our 3-year old child (which was many years ago now for me), we are the more powerful party. We are bigger, stronger, have a more developed brain, more experience, and better command of our fine and gross motor skills to accomplish tasks. But if you want your child to eat their peas, the child has the leverage. Sure, you can use threats and bribes which could impact future opportunities for your child (no dessert unless you eat the peas; no movie after dinner; no playdate the next day with their friend). Carrots and sticks are important tools in the parental toolbox, and can be very effective when used, particularly in combination with one another. But ultimately you cannot force the child to eat the peas. Only they can do so. They’ve got you in the cross-hairs and it’s really a test of your own temperament, behavior, and strategy as a parent how you respond. Not only might your ego be on the line (“I can’t let them win this one. I need to maintain who’s in charge”), but shaping future behaviors is also a factor to consider (“If I surrender on the peas, what am I signaling? It means I lose credibility and they will learn that they don’t have to listen to me in the future.”) Leverage is nuanced and can be a real thorn in the side of the more “powerful” party at the negotiating table when they don’t have it.

Now for the punchline: leverage can shift. Perhaps there’s a way for the real estate developer to affect conditions to change the situation (e.g. start the demolition on the properties surrounding our “little old lady,” creating conditions so intolerable that she finally caves). Perhaps you can use a third party as an influencer: that favorite uncle who your child constantly imitates happens to be visiting that evening for dinner and delightfully devours their peas, exclaiming how good and healthy and strong peas make them feel . . . causing your child to gladly eat their peas so they can be just like Uncle Mark. Another extremely important aspect of negotiation, after the planning is complete, and you are in the thick of it, is remaining agile. Often new information is presented to you through the course of the negotiation. Pay attention.  Assimilating (after validating it) that new information and assessing how it impacts your options (and possibly shifts leverage) is absolutely critical. You may need to adjust your expectations or your bottom line accordingly. You may need to take a break to develop additional options or conduct more research. The point is, leverage is a key player in a negotiation – and a dynamic one.

And for an entertaining depiction of shifting leverage, watch Pirates of the Caribbean: Curse of the Black Pearl.

Lucia Kanter St. Amour, Pactum Factum Principal

What was really going on in the “Crazy Rich Asians” Mahjong scene (film based upon international best selling novel by Kevin Kwan), and what it can teach us about communication, rapport building, leverage (and whether to use it), negotiation, strategy, and cooperation:
As background, Watch the scene here
Read the article here

We live in a culture in the U.S. where people shy from negotiation. When “No Haggle” car purchasing policies were introduced some years ago, they were warmly received by consumers because of the dread of negotiating (though these policies naturally yield disproportionate economic benefit for the car dealership over the consumer). For many, negotiation is emotionally awkward and even synonymous with “conflict.” Some even consider it gauche. In general, negotiation is regarded as a specialized superpower possessed by experts, but otherwise to be avoided whenever possible.

Nonsense. Negotiation happens everyday in small, unsexy ways. We tacitly negotiate for the next open parking space at the grocery store; we negotiate with our children countless times per day (which will necessitate a blog entry on the distinction between power and leverage – ahem); we negotiate with our neighbors about fences, dogs, and noise; we negotiate with colleagues and supervisors over assignments, compensation, vacation scheduling; we negotiate with ourselves (if I go for a run before work, I can relax and watch a movie after dinner).

Perhaps some of the discomfort we have with negotiation stems from an “Us” versus “Them” win/lose paradigm, not to mention a fundamental fear of rejection (“What if they say no?” My stock answer to that is: most likely you are in no worse position than before you asked). Negotiation is like a muscle: the more you exercise it, the stronger it will be and the more you can apply it to varying situations – like the pushups that now allow you to install solar panels on your home or have more energy at the park with your family. One very effective tool to overcome the “Us” versus “Them” apprehension in negotiation is to build rapport with the other party. How do you do this and why is it important?

The How: it means adopting a genuine attitude of curiosity about other people, and slowing down the process a little. If possible, take some time in advance of the negotiation to learn what you can about that person’s background. Even if you know nothing about them, a simple, “How did you get involved with X work?” or “What brought you to this part of the country? Were you raised here?” or even the national origin of their family name . . . before jumping into the nuts and bolts of the horse trading at hand, take a few minutes to get to know them. The key here is that your focus is on learning about them, and letting them know (without so much as saying it), “I see you as a human being.” Then, pay attention to what they say in response. Smile. Show an interest. Demonstrate that you heard them with a recap: “Wow. Coming to California from the midwest seems like it was quite a culture shock. And sounds like you don’t miss the weather!” And then . . . notice if they reciprocate. Do they show an interest in you? It’s ok if they don’t, but it’s also information to keep in mind later in the negotiation.

Do: pay attention and listen (this is different from waiting quietly for your turn to talk); have a sense of humor; look for shared experiences to build upon.

Don’t: bombard them with questions and cause the person to feel interrogated. This has the opposite impact of creating trust.

The Why: Genuinely connecting with another person satisfies a basic need for people to feel that they belong. In fact, people have a stronger need to belong than they do to be “right” factually. When you show an interest in someone else’s life, attitudes, interests it is a validating and satisfying moment for them, not to mention the dopamine the brain secrets because someone is paying attention to them (much better than the dopamine “hit” through the pings supplied by social media, because it’s in the flesh!). Not only does building rapport humanize a negotiation and alleviate some of the defensive posturing characteristic of many negotiations, but it also provides a baseline of behavior for that person. That is, in a more/less relaxed state of mind while talking about a topic that is comfortable and easy for them, what was their tone of voice, volume and vocal pacing? Do they tend to gesture a lot with their hands and body? Do they stop to pause and think? Do they smile? Baseline behaviors when an individual’s defenses aren’t peaked provides a basis for comparison later in the negotiation when their words and actions deviate from the baseline. You may not know the meaning of the deviation, but noticing it may be enough to inform you it’s time for a break and to regroup.

As humans, we have a basic need to connect. We *think* we get that through screens and asynchronous moments: Skype, FaceTime, Facebook, Instagram, Twitter. But it’s an illusion. Minimal effort, knowledge or preparation are required to advance that extra step in attempting to establish rapport – and you concede nothing by doing so.

Lucia Kanter St. Amour, Pactum Factum Principal

Reciprocity Effect is extremely alluring, and one of the most powerful and difficult cognitive traps to resist. It’s very simple: if someone does something for you, you’ll naturally want to do something for them.When you offer something for free, people feel a sense of indebtedness towards you.For example, researchers tested how reciprocity can increase restaurant tipping. Tips went up to 3% when diners were given an after-dinner mint. Tips went up to 20% if, while delivering the mint, the waiter paused, looked the customers in the eye, and then gave them a second mint while telling them the mint was especially for them. In another study, 11% of people were willing to donate an amount worth one day’s salary when they were given a small gift of candy while being asked for a donation, compared to 5% of those that were just asked for the donation.  Think of a recent invitation to a friend’s house for dinner where your friend insists that you need not bring anything other than yourself; it’s almost impossible to just show up at the door empty-handed without bearing some contribution, such as a bottle of wine.

Take-away: Remember the reciprocity principle the next time you prepare for a negotiation: a smart negotiator will have prepared a concession plan, understanding that if they make a concession, the Reciprocity Effect will make it almost irresistible for you to make a concession in return. Some pre-planned concessions could be decoys – that is, the other party is not truly giving up something of value. You can employ the same strategy yourself. Test the legitimacy of concessions made by the other side before Reciprocity kicks in on your part.

Background on our Cognitive Traps series (not our original research): Social and cognitive psychologists have been interested for decades in how the brain processes information and what that produces in the outside world in terms of behavior.  In the 1970’s, two psychologists from Stanford University (Daniel Kahneman and Amos Tversky) started to study aspects of decision-making: does the rational person made decisions based on innate cost-benefit economic analysis? Their work (called Prospect Theory) created a new discipline of science known as Behavioral Economics, which earned them the Nobel Prize in Economics in 2002 (Tversky had died in 1996, so technically the prize only went to Kahneman at the time it was bestowed).  According to behavioral economics, the Rational Person theory doesn’t take into account all the reasons people behave the way they do. People make decisions relative to a reference point, and that reference point is the status quo – “where I am now.” Kahneman and Tversky categorized their work into a set of common heuristics: shortcuts that the brain takes so that it can make decisions in fast-moving everyday life.  But many of these heuristics can also act as cognitive traps in a negotiation, if you aren’t aware of them. Reciprocity is one of them.’

Lucia Kanter St. Amour, Pactum Factum Principal

We won’t sugar-coat it: Harassment claims destroy lives – even when valid, even when vindicated. But it matters a lot to people to feel that their workplace is safe. The #MeToo movement raises deep-rooted complexities. “Men could be falsely accused of harassment or assault. Women could lose out on opportunities at work because men will be afraid to work with them. The punishment for less severe forms of sexual misconduct could be the same as for more severe offenses.” These were among women’s top concerns about the #MeToo movement in a national survey Vox conducted with the media firm Morning Consult in March of this year. These concerns were held by a majority of women surveyed — 63 percent were very or somewhat concerned about false accusations, 60 percent worried about lost professional opportunities, and 56 percent were worried about perpetrators getting the same punishment for different misdeeds.
Read full article here.

Pressures leading to the #MeToo movement in October 2017 were mounting for years (probably decades), beginning with the feminist movement in the ’60s, which raised the consciousness in which women shared experiences of sexual assault and harassment – i.e. the first “MeToo.” We also have key legal and cultural precedents, notably the 1986 U.S. Supreme Court case Meritor Savings Bank v. Vinson, and the high-profile 1991 Senate confirmation hearing of U.S. Supreme Court nominee Clarence Thomas in which law professor Anita Hill testified that Thomas sexually harassed her in the workplace.

The point is that #MeToo isn’t new and didn’t develop as the latest social justice trend. Social movements like #MeToo are usually rooted in deep structural marginalization over time, until the “dam” finally breaks – at which point, players in the present moment pay the price for the many years of inequity and mistreatment. The results can be disproportionate and sometimes misplaced. At Pactum Factum, we have also seen situations where a harassment allegation in the workplace is used a sword rather than a shield (e.g. an under performing employee’s anticipation of an upcoming performance evaluation or adverse action; or other ulterior motive). The notion that “a person wouldn’t come forward and put themselves through the unpleasantness of vetting such a claim unless it were true” does not necessarily hold. But the idea behind the #MeToo movement’s subtitle, “Believe Women,” is that every claim should be thoughtfully heard and thoroughly investigated. A moral and practical balance must be struck when navigating the multiple states of Unknown that confront anyone entrusted to investigate such claims. This is yet another reason that a proper workplace investigation is so critical when these issues arise.

Lucia Kanter St. Amour, Pactum Factum Principal