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INSEAD Professors Lift Lid On Hidden Rules Of Negotiation

Two great negotiating tactics that MBA students can use now

Thu Aug 27 2015

When top flight faculty at the prestigious INSEAD business school turn their attention to the art of negotiation, they’re bound to come up with some good advice.

Two faculty members on INSEAD’s Career Blog have done just that, sharing insights from the experiences of real life C-suite executives, as well as regular employees, who have faced challenging negotiations with their employers.

Negotiation is a very useful skill, and these tips will help you the next time you ask your boss for a raise, extra resources or financing for your MBA.

Michael Schaerer and Roderick Swaab, respectively a doctoral researcher and Assistant professor in organisational behaviour at INSEAD, tackle the challenge of negotiating from a position of powerlessness. Sure, all negotiating guides advise us to line up alternatives that we can fall back on during a negotiation, but more often than not we don’t have them when we need them.

Schaerer and Swaab conducted an experiment in which would-be negotiators were tasked with selling mundane objects (a Starbucks mug and a Rolling Stones CD) to a buyer for the highest price possible. Shortly before entering the negotiation, each participant received a call informing him/her about a response from another buyer. The offer was either high, low, or the buyer was not interested. Interestingly, the experiment showed that sellers without an alternative offer felt less powerful, but made higher first offers and negotiated a considerably higher sales price for the mug than sellers with a weak alternative. 

Lesson: negotiators tend to rely too heavily on their alternatives. If you have an unattractive alternative and focus on this, you’ll negotiate a worse deal than if you just focused on your target price.

In another blog post, Horacio Falcao, Affiliate professor of Decision Sciences, explains how to negotiate your way to career flexibility.  He relates the case of a Ms. IN, a high-flying London-based lawyer, who was devastated after being told she would not make partner. “After years of putting everything she had into the firm, she was exhausted and ready to quit and become a yoga instructor,” says Falcao. Many would feel at a complete loss in this situation, but Falcao helped her to turn it around.

He counselled Ms IN to look for something fulfilling she could do that drew upon her valuable legal talents. The bottom line was that not making partner turned out to be advantageous for Ms. IN in negotiating with her company, in that it helped her better understand what she truly wanted. After identifying an NGO she supported, that was looking for pro bono lawyers, she talked to her bosses not about quitting, but about changing her terms so that she could do more pro bono work. They hammered out an arrangement whereby Ms. IN would work eight months per year for the firm, commit to mentor younger female attorneys, take a month’s vacation, and spend the remaining three months working for the NGO in Tanzania on her company’s behalf, receiving her full salary, while promoting the firm’s pro bono agenda.

Lesson: You can maximise money and happiness, while minimising risk, by investing a small slice (not more than ten percent) of your time in a speculative project, without letting go of you steady paycheck

Learn more about negotiation tactics on the INSEAD Knowledge Blog.

INSEAD’s prestigious one-year MBA is currently accepting applications for the September 2016 intake. Find out more here.