How Rational Is Your Negotiating?

I talk a lot about rationality, using a logical basis for making decisions. But what about rationality or logic in negotiations.

Negotiations are just a series of decisions – weighing up the value of agreeing with the other party or not, and the costs associated with each.

According to Deepak Malhotra and Max H. Bazerman there are three ways in which people with whom one is negotiation act that could be deemed counterproductive:
Do these people lack good information?
Are they operating with constraints you don't know about?

Are they holding onto hidden interests?
In most cases, the barrier to smooth negotiation is one of these three areas.

In their book Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond they describe strategies and tactics to overcome counterproductive behavior to keep the deal on track.

"What appears to be genius actually reflects careful preparation, an understanding of the conceptual framework of negotiation, insight into how one can avoid the errors and biases that plague even experienced negotiators, and the ability to structure and execute negotiations strategically and systematically."

However, do such strategies work only when you're dealing with people who will listen to reason? How does one negotiate with someone who irrational?

Irrational behaviour in negotiation might include: reckless behaviour, poor strategy, and even acting contradictory to self interest. The advice is to be very careful before labeling someone "irrational." Are we using a sound, objective basis to judge what is truly irrational. In most cases, the answer is no. Often, behavior that appears to be irrational has a hidden rational cause – one designed to destabilise and confuse the opposing party.
Lets, analyse the three most common reasons negotiators mistakenly judge others as irrational.

Rational - But Uninformed

Each party takes a stand based on the information they have available to them. The validity of that information is not a factor – just the perception of the information being valid is sufficient for a party to dig their toes in and refuse to see any other alternative. Even should the other party offer to present credible information that invalidates the other parties claim, they will likely refuse. This refusal may appear to be irrational – whereas the real issue is the lack of credible information. If either party does not trust the information provided by the other party – perceived irrational behaviour is claimed. It usually takes a credible third party to audit the data held by both sides and present an independent view of ‘the truth’.

There is a difference between stupidity and ignorance - ignorance we can fix. When the other side appears irrational, they may just be uninformed or ill-informed. If you can find a respectful way to educate or inform them about their true interests, the consequences of their actions, the strength of your BATNA (Best Alternative to a Negotiated Agreement), and so on—there is a strong likelihood they will make better decisions.

If the other party says no to your offer – an offer you truly feel is in their best interest, do not assume they are irrational – instead, help them understand why you r offer is in their best interest. They may not be have knowledge of, or understand the significance of a crucial piece of information.

Rational - Hidden Constraints

Often, one party ill make an offer to another party believing it to be of great value to them, and as such, will help to win the deal. However, the other party may not be able to take advantage of the offer due to constraints unknown by the party making the offer. Their refusal of the offer will seem totally irrational to the party making the offer. Hence, when considering the interests of the other party – also consider their constraints in accepting various elements of the offer. Accepting an offer may create a predicament such as compromising a long term relationship with a current supplier or a constraint based on some moral or ethical ground. Constraints may be financially related – such as restrictions on pay differentials or purchasing sign off limits can constrain how much a party can offer or accept. They can also have legal implications of setting dangerous precedents or conflicts of interest.
Always try to discover these constraints—and to help other parties overcome them—rather than dismissing others as irrational.

Rational - Hidden Interests

In any negotiation a wide range of constraints can exist – offers of money and status may be outweighed by perception of fairness and equity. Offers seen as generous by the giver may have longer term impacts in the future for the receiver.

People can reject offers for many reasons – they think it unfair, they don’t like you, there are consequences you are not aware of that impact the receiver. Unless we fully understand all the impacts of an offer we can see refusal of the offer as irrational.

Just Irrational

Sometimes your opponent really just doesn’t know what is good for them. In such instances, often the only way to achieve an outcome is to work around them or just hardnose your BATNA because you know that nothing you offer will be perceived as having value. You might also leverage various strategies for confronting your counterpart's biases. However, rather than thinking there must be some strategy that will work to bring irrationality ‘to light’ you may just have to accept the person as being one who just is not capable of seeing reason.