Negotiation in the age of the Internet

Negotiation is as difficult as it is vital, and the Internet is making it even more of a challenge. Leading US academics, Professors Margaret Neale and Thomas Lys, offer advice on how to negotiate in cyberspace.

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By  David Ingham Published  April 3, 2001

What is online negotiation?|~||~||~|Negotiation is as difficult as it is vital, and the Internet is making it even more of a challenge. What do you do when you can’t even see and therefore judge the body language of the person you’re negotiating with? That’s why online negotiation was a key focus area of Leading Concepts’ latest executive education programme. Prof. Margaret Neale, Professor of Organisations and Dispute Resolution, Stanford Business School; and Prof. Thomas Lys of the J.L. Kellogg Graduate School of Management, Northwestern University explain the issue.

Arabian Business.com
What is online negotiation to start with? Is it two people on a whiteboard application writing horrible things to each other?

Margaret Neale
It certainly could be. When you talk about online negotiation, one of the first things, a typical one, that goes on would be an e-Bay auction. It’s very clear that there’s a buyer and multiple sellers. In this respect, what’s typically sold are commodities. However, what I think most people are interested in is day-to-day negotiations and how the Internet serves to enhance or distort those processes.

Arabian Business.com
If you’re a business executive, is a big part of all this what takes place on a Commerce One or Ariba business marketplace?

Margaret Neale
No, it’s much more so trying to understand how I should behave, what will create the most value for us and for me in this context. So, it’s a much broader kind of behavioral and economic perspective, other than where I can get the right price for this supply and so on…

Arabian Business.com
Can you give me a few scenarios that relate to what this is about?

Margaret Neale
You’re in Dubai and I’m in the US, and we have a project we’re trying to get off the ground. How do we negotiate about what we’re going to do, what the cost will be? In many respects, what we’re interested in, on this particular aspect of negotiation, is how the Internet can help or hurt. You’ve got to be very mindful of the role that it plays and the cost and the benefits that it allows because of its nature.

Let me give you an example. It appears to be the case that communications through the Internet exacerbate whatever emotional tone exists before the communication starts. For example, there are all sorts of stories about people developing relationships over the Internet.

But imagine that you’re trying to negotiate over the Internet. Most of us, when we say ‘negotiation’, think about being adversarial, win or lose. So when you start negotiating over the Internet you’re really playing against an emotional screen which is negative, competitive, adversarial, all those sorts of things. Negotiations that are win-wins are a relatively small portion of the negotiations that most people do.

||**||Can you learn to negotiate?|~||~||~|
Arabian Business.com
How do you teach not just online negotiation but the art of negotiation in general? Isn’t it just a matter of whether or not you’re a reasonable, rational, calm kind of person and don’t lose your temper?

Margaret Neale
Let me take issue with its being an art. If it’s just art, it’s hard to teach art. But you can teach science and the focus of the programme that Thomas and I do is based on what we know empirically about negotiations. So it’s based on a lot of research myself and my colleagues have done.

What you won’t hear in one of our programmes is war stories about ‘When we were negotiating with the ‘X’ here’s what we did.’ It’ll be entertaining very much like a television programme, but it’s not educational. So part of what we’ve done is we’ve tried to really decompose the negotiations process. We start off with relatively straightforward negotiations: two parties, single issues and we move them to multiple parties with multiple issues. And it turns out that all those things make it more complex and add things that we had to think about.

Thomas Lys
In many aspects I have to disagree with one thing she said. Two parties, single issue is, in my mind, the hardest negotiation. That’s not negotiation at all, that’s haggling. It gets easier when there are multiple issues.

One of the things that we teach is how to take advantage of the fact that there are multiple issues. Why do multiple issues make a negotiation useful and a single issue doesn’t? One of the mistakes people make is they start with a wonderful situation with multiple issues and rather than looking at them as a problem, they divide them into little problems which are all single issues. And each one is impossible to solve.

Margaret Neale
If we each take six issues where there may be some great opportunities, of those six issues you may care about some of them a lot more than I do and vice versa. We can make trades. However, if we take all of those six issues, break them apart and now we deal with issue number one, then why should I give in to you? I need a trade.

Thomas Lys
What people are not very good at is that they take a complex situation that has a lot of potential, turn it into a simple situation that has no potential, and give up a lot of value.

Arabian Business.com
What are the dos and don’ts both online and offline?

Margaret Neale
Don’t make it single issue. Perhaps one of the most important ‘dos’ is around the issue of planning and separation, and one of the things from our research and experience is that it’s something people do the least of. People that think they’re really good at negotiation walk in and say ‘I can do this.’

One of the things Tom has brought to this interaction is an understanding of the importance of discipline in negotiation. For example, one of the things he suggests is that before you make your first offer to somebody, write down what you think their responses are going to be. Make your offer and see how close you are.
If you’re close, you’re in the right ballpark in terms of planning. If you’re surprised then you haven’t done your homework. You shouldn’t be surprised by their response.

For example, knowing what your bottom line is, what is the least amount you’re willing to pay, or the most. Make an evaluation of your alternatives. What’s important to you, what are your options if this deal doesn’t happen? Because that will determine how much power you have, how easy it is for you to walk away.

Thomas Lys
Find out about what the other side values. If you make an offer and the person doesn’t respond the way you thought that means that you still don’t understand the way they think. One of the mistakes that people make is that people automatically assume that because I value this a lot and this a little, then so do you. What creates value is differences, not commonalities. So either you know these things and you can make an offer and you know the answer, or you make the offer and the purpose of the offer really is trying to figure out where the tradeoffs are for your counterpart.

||**||The grammar factor|~||~||~|
Arabian Business.com
There’s concern that people’s level of ability to communicate over e-mail is really quite poor. Do you find this is a major problem in online negotiations?

Margaret Neale
One of the studies I’ve looked at is how people exert power in e-mail interaction. On first blush, one shouldn’t have grammatical errors, bad sentence construction in one’s e-mail. It turns out that high powered parties typically do, particularly in e-mail communication. Why? Two reasons.

One you could argue is a structural reason given the generational difference between people at the top of the organisation. They didn’t have a lot of experience learning to type. But that’s too easy, the reality is that it’s a statement about how much time I spend on this e-mail. My time is very valuable, I don’t care if it’s correctly structured.

With one company we looked at, you could tell who was where in the power hierarchy by things like signatures on e-mails. How detailed was inversely related to their power. If I’m a new person, I’ve got a very complex signature. People would put a lot of things in their e-mails like quotes. If I’m a CEO I don’t need that.

What we liked about that study is that it applies to negotiation. For example, high powered parties want to take stuff face to face. Low powered parties typically want to do stuff online, because that’s a democratiser.

Bad grammar can mean a whole lot of things given the context. Sometimes bad grammar and poor spelling can show people how powerful you are, just like being late for a meeting. One thing we expected was that low powered parties, when trying to make a hard point, would make a smiley face. In this organisation that we studied, high powered people, when they were trying to tell you what to do but not being too overt about it, would put a little smiley face.

Arabian Business.com
When people are doing online negotiation, should they be left to do it, or should senior management monitor what they’re doing?

Margaret Neale
The main thing I would be interested in is making sure that the people doing the online negotiations understood how online negotiation is different. People will typically use online technology to augment an ongoing negotiation. But if you’re in one of those situations where you’ve never met this person before, find out about them, ask about them, find out what you have in common.

Arabian Business.com
What are your final words of advice for negotiators?

Thomas Lys
View it as a game of chess. Look at the situation not just from your situation but from your counterpart’s. Good guys are those that can think one move ahead. Geniuses can think maybe two or three. Don’t just look at what I want but what the others would want. Value creation means that you have an interest in staying in the game.

Margaret Neale
Another point is the whole notion of preparedness, and thinking about what the other person wants as well as what you want. Often times, one of the critical things that distinguishes a successful negotiator from a less successful counterpart is whether you know when to walk away.||**||

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