Power helps at the bargaining table. It transforms people into bolder negotiators, making them more confident, optimistic and proactive. It also shields negotiators from the tactics of the other side, making them less susceptible to the opinions, tactics and strategies encountered.
Those observations – from academics Michael Schaerer, Adam Galinsky and Joe Magee – lead to the inevitable question: How do you obtain power?
In an article on The Insead, they identify four important sources of power – labelled colourfully but without explanation "the four horsemen" – and how those help or hurt at the bargaining table.
Alternatives: The strength of one's best alternative – commonly called the best alternative to a negotiated agreement, popularly known by the acronym BATNA, is probably the most important source of power.
"When negotiators have an attractive outside offer going into a negotiation, they are less dependent on the other party to reach their objectives than when they have an unattractive alternative or no alternative at all. A valuable alternative offer allows a negotiator to put pressure on the opponent, for example, by threatening to leave the negotiation table if the other party cannot exceed one's expectations," the authors write.
Less dramatically, it can serve as a proxy when you are figuring out what offers to make – the better your alternative, the less you need to give up. But a danger is focusing on your alternatives too much. Research shows that if the alternative is weak, negotiators ask for less than people with no alternative.
Information: It's helpful to have information relevant to the negotiation, notably what's known as your counterpart's "reservation price," their maximum willingness to pay. All you have to do is edge slightly past that price in the negotiation.
But even without that information, you can benefit from having insight into the other party's worries and constraints, general expertise in negotiations, and knowledge of cultural practices such as tactics that may be offensive across the table.
You can gain knowledge by doing your homework in what the academics say is the "often underestimated and neglected" planning stage of the process. But also ask questions to help understand the other party's preferences better, and put yourself in their shoes to make an educated guess about their priorities.
Status: The extent to which you are respected by your counterpart can also offer power, since low-status individuals tend to defer to those with higher status. Higher-status negotiators are also viewed as more competent.
"Status tends to be relatively fixed and can only be accumulated slowly over time. Negotiators should thus aim to build status long in advance of the negotiation by building a reputation as a competent, trustworthy player," the authors say.
Social capital: The more social or professional connections a negotiator has, the more likely he or she will be viewed as influential. This social capital also aids the three other sources of power; for example, if you have a large social network, that increases the chances of improving your alternatives. These connections need not be extremely close. Distant ties can still be helpful.
"The order in which we described the sources of power relates to their relative strength and importance. A strong alternative is probably the most valuable source of leverage you can have. Detailed information about your counterpart can also be quite powerful to have, whereas status and social capital operate in more indirect ways, such as facilitating other sources of power," the authors conclude.
"Having all four horsemen of power is optimal but not always necessary. For example, a negotiator with a weak or no alternative may still be able to negotiate a profitable outcome by relying on information about the counterpart's reservation price or by leveraging one's status."
Also on negotiations, Jay Hewlin, a lawyer and lecturer at McGill University's Desautels Faculty of Management, warns in Harvard Business Review that the most overused tactic is threatening to walk away from the table.
He says that relying on even the best of alternatives as leverage can be tricky business. The other party, for example, might have an even better alternative available to them, so at the minimum, you must consider the asymmetry of alternatives faced by the two parties.
"BATNAs help negotiators establish minimum or maximum thresholds beyond which a deal with a particular negotiator is of no value. In essence, they are a defense against an inferior agreement. They are not designed to facilitate relationship building, exploration, creativity, or collaboration, all of which most researchers and practitioners agree are necessary to reach the often sought for, but rarely achieved optimal or 'efficient' agreement," Mr. Hewlin writes.
He urges you to think about mutual dependence, not just alternatives. The degree to which the other party needs what you are offering is central to your power. But you depend on them as well, of course, so mutual dependence is in effect the total of your joint dependence on each other. Focusing on mutual dependence nudges you to explore more possibilities instead of obsessing about how you can obtain the maximum benefit. It encourages you to think of how you can enhance the benefit you offer.
He takes a provocative look at power in negotiations, warning how it can hamper them, as summed up by a common statement: "When I feel I have more power in a negotiation, I negotiate better, but when the situation is reversed, I don't do as well." If your power fluctuates with feelings, you may act opportunistically, trying to grab more value, and leave the other side feeling their interests were overlooked. He suggests it's better to let power flow from context – actual reality – rather than your feelings and, where possible, use that to focus on mutual dependency.
Mr. Hewlin adds that negotiations are won mostly at the preparation table, not the negotiation table. Do your research, treating the unknown as offering hidden potential rather than as a minefield.
"Negotiation by its very nature requires compromise, which means there is no such thing as absolute power in negotiations. Every negotiator has some power and there's always some degree of mutual dependence. So be careful not to short-circuit your main power source because you are so focused on alternative power sources. Your BATNA can help you determine what is probable if the current deal fails to materialize; however, it's incapable of revealing a deal's full potential. Only you and your counterpart working together at the table have the power to create a deal that not only exceeds the BATNA, but perhaps makes it altogether irrelevant," he concludes.
Quick Hits
- Here’s a topsy-turvy idea: Have job candidates interview you and each other. Management consultant Lawrence Miller found when they interview prospective bosses, candidates can better decide whether they will fit in, and when they interview each other, it reveals how they operate with others.
- Leadership skills decline from age 25 until retirement, according to 360-degree feedback collected by the Zenger/Folkman leadership development consultancy.
- An analysis of 28 different studies found a greater chance of obesity among night-shift workers. Permanent night workers demonstrated a 29 per cent higher risk than rotating shift workers. The researchers recommend modifying working schedules to avoid prolonged exposure to long-term night shift work.
- Consultant Michael Kerr suggests starting the day with five coins in your left pocket, and every time you thank an employee for a specific, genuine reason, transfer a coin to the right pocket. Your goal: Have them all in the right pocket by day’s end.
- Executive search consultant Terry Whitehead says in a report that “seeing an HR executive on a corporate board may not be quite as rare as the recent solar eclipse, but it is not far off.” A recent survey by his firm of the top 100 public companies headquartered in British Columbia and Alberta showed that only seven of those companies included an HR executive on their board, despite the value those practitioners offer.
Harvey Schachter is a Kingston, Ont.-based writer specializing in management issues. He writes Monday Morning Manager and management book reviews for the print edition of Report on Business and an online column, Power Points. E-mail Harvey Schachter
Harvey Schachter