https://docs.google.com/file/d/0B0FApT99RbefZ2xJYW1OVENDeWc/edit
When someone seems to need you more than you need him, “Take it or
leave it” can seem like the simplest negotiating gambit. If a seller is desperate
to unload his business and you’re the sole bidder, why not make a rock-bottom
offer? And if you’re hiring in a competitive job market, you might as well aim to
keep labor costs as low as possible, right?
It’s true that negotiators with abundant power tend to get better deals than
their weaker counterparts. Yet whether their power springs from a title, resources,
or (most typically) a strong outside alternative to agreement, powerful negotia-
tors often make a number of predictable and costly mistakes. Most notably, the
powerful are susceptible to underestimating their opponent, overlooking the
other side’s perspective and devaluing his concerns.
If someone leaves the bargaining table feeling that you’ve disrespected or
mistreated her, you may end up the victim of a power backlash. The next time
you think you hold all the cards, prepare to ward off the following three common
reactions to perceived abuses of power.
Power Backlash No. 1: They dig in their heels. Powerful negotiators generally don’t
devote enough time to considering the other side’s point of view, Northwestern
University professor Adam D. Galinsky and New York University professor Joe
C. Magee have written in Negotiation. As a consequence, the powerful may fail to
anticipate “irrational” behavior from their counterparts. When confronted with
your demands, someone may refuse to concede on principle despite a weak bar-
gaining position.
Here’s one example, as reported by Russell Working in the Chicago Tribune.
During 2003 contract negotiations with its service employees’ union, the Congress
Plaza Hotel in Chicago insisted on a salary freeze and the right to subcontract
certain jobs. Blaming a slump in the travel industry for its tough stance, the
independently owned hotel took a gamble that Unite Here Local 1, a relatively low-
clout union, would cave. Yet with their salaries already trailing industry averages,
113 Congress employees, primarily housekeepers and restaurant staff, chose to
strike instead. The hotel brought in temporary workers to replace them.
Four years passed, neither side budged, and the strike became the longest-
running in Chicago history. The constant picket line drove guests away, and the
Congress slashed its rates. For business negotiators, the Congress offers a cau-
tionary tale. The hotel owners underestimated their employees’ tenacity and
overlooked the union’s outside interests. One striker told the Tribune that a five-
or six-year strike would be a small sacrifice for those who had worked at the
hotel for decades.
Power Backlash No. 2: They renege on the deal. The greater the power differential
in a negotiation, the more parties tend to focus on maximizing individual gain,
Notre Dame University professor Ann Tenbrunsel and Northwestern University
professor David Messick found in their research. When you are the stronger par-
ty, that competitive attitude could lead you to coerce your opponent into accept-
ing a deal she can’t fulfill. Suppose a big-box retailer tells a sporting-goods sup-
plier that it must submit a lower bid to retain a contract. Reluctantly, the supplier
delivers a revised bid with a slim-to-none profit margin. It should surprise no
one if the supplier misses delivery targets, sacrifices product quality, or defects to
one of the retailer’s competitors.
Even the biggest industry behemoth should be motivated to build trust-
ing business relationships based on more than just a short-term price. To do so,
spend time exploring the other party’s vantage point before talks begin. What are
their outside alternatives and strengths in the broader marketplace? They may be
more powerful than you think. MIT professor Lawrence Susskind advises less-
powerful negotiators to seek an “elegant solution” that will meet both sides’ in-
terests. For the sporting-goods company, that might mean proposing to sell new
products to market segments that the retailer wants to bring into its stores. Let
your fellow negotiators know that you are eager to listen to their ideas and brain-
storm value-creating opportunities.
Power Backlash No. 3: They take you to court. People tend to hold the powerful
to higher ethical and moral standards than they do the weak, Tenbrunsel and
Messick found in their research. Our legal system does as well. In particular,
says Harvard professor Guhan Subramanian, the courts may constrain the ac-
tions of the powerful by policing the terms of a deal, reading additional terms
into a contract, or imposing procedural constraints on a negotiation.
In the famous 1978 Canadian case Harry v. Kreutziger, a boat owner sold
his boat and accompanying fishing license to an individual who knew consider-
ably more than the seller about the local boating situation. The seller settled for
a nominal sum, thinking that his boat was not worth very much. He was right
about the boat—but he found out after the sale that the fishing license was ex-
tremely valuable. He took the buyer to court and successfully reversed the sale.
The judge found that the seller had been “dominated and overborne” by the
buyer, who had failed in his obligation to be “fair and reasonable” in his dealings
with the seller.
The lesson: Because power can inspire resentment, when you hold all the
cards, you must make an extra effort to meet your own fairness standards and
abide by the relevant legal rules.
When someone seems to need you more than you need him, “Take it or
leave it” can seem like the simplest negotiating gambit. If a seller is desperate
to unload his business and you’re the sole bidder, why not make a rock-bottom
offer? And if you’re hiring in a competitive job market, you might as well aim to
keep labor costs as low as possible, right?
It’s true that negotiators with abundant power tend to get better deals than
their weaker counterparts. Yet whether their power springs from a title, resources,
or (most typically) a strong outside alternative to agreement, powerful negotia-
tors often make a number of predictable and costly mistakes. Most notably, the
powerful are susceptible to underestimating their opponent, overlooking the
other side’s perspective and devaluing his concerns.
If someone leaves the bargaining table feeling that you’ve disrespected or
mistreated her, you may end up the victim of a power backlash. The next time
you think you hold all the cards, prepare to ward off the following three common
reactions to perceived abuses of power.
Power Backlash No. 1: They dig in their heels. Powerful negotiators generally don’t
devote enough time to considering the other side’s point of view, Northwestern
University professor Adam D. Galinsky and New York University professor Joe
C. Magee have written in Negotiation. As a consequence, the powerful may fail to
anticipate “irrational” behavior from their counterparts. When confronted with
your demands, someone may refuse to concede on principle despite a weak bar-
gaining position.
Here’s one example, as reported by Russell Working in the Chicago Tribune.
During 2003 contract negotiations with its service employees’ union, the Congress
Plaza Hotel in Chicago insisted on a salary freeze and the right to subcontract
certain jobs. Blaming a slump in the travel industry for its tough stance, the
independently owned hotel took a gamble that Unite Here Local 1, a relatively low-
clout union, would cave. Yet with their salaries already trailing industry averages,
113 Congress employees, primarily housekeepers and restaurant staff, chose to
strike instead. The hotel brought in temporary workers to replace them.
Four years passed, neither side budged, and the strike became the longest-
running in Chicago history. The constant picket line drove guests away, and the
Congress slashed its rates. For business negotiators, the Congress offers a cau-
tionary tale. The hotel owners underestimated their employees’ tenacity and
overlooked the union’s outside interests. One striker told the Tribune that a five-
or six-year strike would be a small sacrifice for those who had worked at the
hotel for decades.
Power Backlash No. 2: They renege on the deal. The greater the power differential
in a negotiation, the more parties tend to focus on maximizing individual gain,
Notre Dame University professor Ann Tenbrunsel and Northwestern University
professor David Messick found in their research. When you are the stronger par-
ty, that competitive attitude could lead you to coerce your opponent into accept-
ing a deal she can’t fulfill. Suppose a big-box retailer tells a sporting-goods sup-
plier that it must submit a lower bid to retain a contract. Reluctantly, the supplier
delivers a revised bid with a slim-to-none profit margin. It should surprise no
one if the supplier misses delivery targets, sacrifices product quality, or defects to
one of the retailer’s competitors.
Even the biggest industry behemoth should be motivated to build trust-
ing business relationships based on more than just a short-term price. To do so,
spend time exploring the other party’s vantage point before talks begin. What are
their outside alternatives and strengths in the broader marketplace? They may be
more powerful than you think. MIT professor Lawrence Susskind advises less-
powerful negotiators to seek an “elegant solution” that will meet both sides’ in-
terests. For the sporting-goods company, that might mean proposing to sell new
products to market segments that the retailer wants to bring into its stores. Let
your fellow negotiators know that you are eager to listen to their ideas and brain-
storm value-creating opportunities.
Power Backlash No. 3: They take you to court. People tend to hold the powerful
to higher ethical and moral standards than they do the weak, Tenbrunsel and
Messick found in their research. Our legal system does as well. In particular,
says Harvard professor Guhan Subramanian, the courts may constrain the ac-
tions of the powerful by policing the terms of a deal, reading additional terms
into a contract, or imposing procedural constraints on a negotiation.
In the famous 1978 Canadian case Harry v. Kreutziger, a boat owner sold
his boat and accompanying fishing license to an individual who knew consider-
ably more than the seller about the local boating situation. The seller settled for
a nominal sum, thinking that his boat was not worth very much. He was right
about the boat—but he found out after the sale that the fishing license was ex-
tremely valuable. He took the buyer to court and successfully reversed the sale.
The judge found that the seller had been “dominated and overborne” by the
buyer, who had failed in his obligation to be “fair and reasonable” in his dealings
with the seller.
The lesson: Because power can inspire resentment, when you hold all the
cards, you must make an extra effort to meet your own fairness standards and
abide by the relevant legal rules.
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