RESEARCH & IDEAS

Dealing with the 'Irrational'

Negotiator
Published: October 3, 2007
Authors: Deepak Malhotra and Max H. Bazerman

"Negotiators who are quick to label the work when you're dealing with people who will The executive called the employee and told
other party 'irrational' do so at great potential listen to reason," an exasperated executive him what the accounting records revealed; he
cost to themselves," say HBS professors Deepak student remarked recently. "But the people I also offered to send a copy of the records. He
Malhotra and Max H. Bazerman. Their new deal with are completely irrational. How can then made it clear that his case was airtight, but
book, Negotiation Genius, combines expertise you possibly negotiate with someone who is offered to forgive the $25,000 overpayment if
in psychology with practical examples to show irrational?" As the executive's question reveals, the employee agreed to forgo his groundless
how anyone can improve dealmaking skills. In negotiators often struggle with the task of trying suit as well. The employee's response: "No way.
this excerpt, Malhotra and Bazerman describe to negotiate with those who behave recklessly, I don't need to see the records. I'll see you in
what to do when the other party's behavior does strategize poorly, and act in ways that seem to court!"
not make sense. Key concepts include: contradict their own self-interests, and any The CEO was very confused. There was no
• When people on the other side of the would-be negotiation genius needs to way for the employee to win in court. Why was
negotiating table appear irrational, understand how to deal with these obstacles. he behaving so irrationally?
reckless, and lacking in self-interest, they Our advice is this: be very careful before Deepak suggested to the executive that the
may in fact be uninformed. labeling someone "irrational." Whenever our problem was probably not that the employee
• Try to recognize and understand their students or clients tell us about their "irrational" was behaving irrationally, but that he lacked
constraints. or "crazy" counterparts, we work with them to credible information. The executive was
• Identify the underlying interests that cause carefully consider whether the other side is truly convinced that the employee would lose the
your fellow negotiators to appear irrational. irrational. Almost always, the answer is no. In court battle, but it was possible that the
most cases, behavior that appears to be employee was still confident that he would win
irrational has a rational—albeit hidden—cause. the case because he did not trust the executive
Editor's Note: What do you do when the Here, we will share the 3 most common reasons or the firm's record keeping. How could the
people with whom you are negotiating act in that negotiators erroneously judge others as executive educate the employee regarding his
ways that can best be called counterproductive? irrational.2 We will also describe the dangers of prospects for winning in court? Deepak advised
Before throwing up your hands, take a deep doing so and explain how to avoid making such him to have an objective third party,
breath and ask yourself 3 questions. Do these mistakes. specifically a professional accounting firm,
people lack good information? Are they conduct an audit of the records pertinent to this
operating with constraints you don't know dispute and to mail the results to the employee.
about? Are they holding onto hidden interests? Mistake 1: They Are Not (This would be far less expensive than going to
According to Deepak Malhotra and Max H. Irrational; They Are court.) Having this information would diminish
Bazerman, chances are the main hurdle to Uninformed the employee's perceived likelihood of winning
smooth negotiation is behind 1 of these 3 An executive (who is one of Deepak's in court and make litigation a less attractive
questions. When you label someone students) was recently involved in a dispute option. What was the result? The employee
"irrational," you limit your own options, as they with an ex-employee. The employee claimed dropped the suit.
write in Negotiation Genius: How to Overcome that he was owed $130,000 in sales When Deepak was in graduate school, an
Obstacles and Achieve Brilliant Results at the commissions for the work he had done prior to economics professor began his first day of class
Bargaining Table and Beyond. The following being fired from the firm a few months earlier. with the following statement: "I want you all to
excerpt describes strategies and tactics to The executive, on the other hand, claimed the remember something—you are not stupid, you
overcome another party's counterproductive employee was owed nothing—in fact, he are just ignorant. If you were stupid, we could
behavior and keep the deal on track. insisted the employee had been overpaid by not do much about it. But ignorance we can
These are ideas that anyone can put to use in $25,000. fix." This insight is as relevant to negotiators as
multiple settings of business. As Malhotra and What was the reason for the discrepancy? it is to graduate students. Often, when the other
Bazerman observe, negotiation geniuses are At the time the employee was fired, the side appears irrational, they are in fact
made, not born. "What appears to be genius company's accounts were a mess; records had uninformed. If you can help educate or inform
actually reflects careful preparation, an been kept poorly. Since then, the firm had hired them—about their true interests, the
understanding of the conceptual framework of a new accountant and updated all of the records. consequences of their actions, the strength of
negotiation, insight into how one can avoid the These records now clearly revealed that the your BATNA (Best Alternative to a Negotiated
errors and biases that plague even experienced employee's claim was entirely illegitimate; if Agreement), and so on—there is a strong
negotiators, and the ability to structure and anyone had a claim to make, it was the firm. likelihood they will make better decisions. For
execute negotiations strategically and The executive was uninterested in going to example, if someone says "no" to an offer that
systematically." court to recoup the $25,000 that the firm was you know is in her best interest, do not assume
"All of the strategies you have described owed and wanted to drop the matter entirely. she is irrational. Instead, work to ensure that she

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understands why the offer is in her best interest. employee because it refuses to raise her salary Leslie decided that she would rather quit her job
She may simply have misunderstood or ignored to match a competitor's higher offer, the firm is than be treated this poorly. By doing so, she lost
a crucial piece of information. not necessarily behaving irrationally; it may 2 years of compensation and also took a hit in
instead be constrained by an HR policy that her retirement benefits. The managers, who had
restricts it from creating huge pay differentials only the best of intentions, were left asking
Mistake 2: They Are Not in the firm. themselves, "Why did she behave so
Irrational; They Have Similarly, when your counterpart seems irrationally?"
Hidden Constraints unwilling to make even small, reasonable What the managers failed to appreciate was
In 2005, the U.S. government passed concessions that could seal the deal, you might that money and status were not the only issues
legislation to increase food aid to countries that tell yourself he's a fool, or you might try to of interest to Leslie. She also cared about
were in dire need of such assistance. There was discover how much authority he has to perceptions of fairness and equity. The
much support among politicians and activists negotiate a comprehensive, value-maximizing managers felt they had given her more than she
for this initiative. Not surprisingly, however, deal. If he is heavily constrained, you might try even deserved. But in failing to see how their
there were also certain special-interest groups to negotiate with someone who has greater decision would play out in the future, they
that opposed this legislation. Here's what was dealmaking authority. created a situation in which Leslie felt
surprising: One of the groups that voiced In negotiation, a wide variety of possible undervalued, phony, and embarrassed.
opposition was a consortium of nonprofit constraints exist. The other side may be More generally, people will sometimes
organizations whose mission it was to lobby for constrained by advice from her lawyers, by the reject your offer because they think it is unfair,
an increase in food aid to disadvantaged fear of setting a dangerous precedent, by because they don't like you, or for other reasons
countries! What explains such seemingly promises she has made to other parties, by time that have nothing to do with the obvious merits
irrational and self-defeating behavior? Why pressure, and so on. Negotiation geniuses try to of your proposal. These people are not
would this group oppose legislation that discover these constraints—and to help other irrational; they are simply fulfilling needs and
achieves precisely what it purports to want? parties overcome them—rather than dismissing interests that you may not fully appreciate.
The answer lies not in understanding the others as irrational. When others appear irrational, negotiation
group's interests but in understanding its geniuses do not write them off as crazy. Instead,
they investigate: "What might be motivating her
constraints. In order to increase the amount of Mistake 3: They Are Not to act this way? What are all of her interests?"
food sent to disadvantaged countries, the
consortium had in the past partnered with
Irrational; They Have
American farmers to lobby the U.S. government Hidden Interests But What If They Really Are
jointly for greater aid. Why did the farmers join Some years ago, a group of managers
in this campaign? Because when the U.S. decided to promote Leslie, one of the firm's
Irrational?
government increased food aid, it bought more administrative assistants. Leslie had worked for If your counterpart truly is irrational—in
food from American farmers. As a result, both the firm for 30 years and was only 2 years away other words, he is determined to work against
the farmers and the nonprofits got what they from retirement. She had performed well what is in his best interest—then your options
wanted. throughout her career and received salary will be fewer. You can try to push through an
increases commensurate with her performance. agreement despite his irrationality, you can try
"The problem was probably Because she was already at the top of her salary to "go around him" by negotiating with
bracket, it was not possible for the managers to someone else with authority who seems more
not that the employee was pay her more money; nor was she scheduled for willing to listen to reason (such as his boss or
a formal performance appraisal. Rather, the colleague), or you may decide to pursue your
behaving irrationally, but BATNA because his irrationality has eliminated
managers simply wanted to do something nice
that he lacked credible for Leslie, so they decided to surprise her with a all hope of creating value. You might also
promotion. Her job responsibilities would not leverage the various strategies for confronting
information." change, but the new title would give her greater your counterpart's biases that we have outlined
status and prestige. in Chapters 4-6.
This case, however, was different. Mindful But we suggest—again—that you
When she heard of the promotion, Leslie
of escalating budget deficits, Congress had reconsider your assessment. Negotiators who
was delighted. She understood that her salary or
decided that the only way to increase foreign are quick to label the other party as "irrational"
job responsibilities would not increase, but that
food aid was to purchase the food more do so at greater potential cost to themselves.
was fine with her.
cheaply—not from American farmers but from When you use the "irrational" label, you limit
Soon after receiving the promotion,
developing countries. What would appear to be your options, because there is not much you can
however, Leslie learned that she was among the
a double win for the nonprofits (increased food say to someone who you truly believe is unable
lowest paid employees with her job title. She
aid and increased support for poor farmers in to reason, uninterested in fulfilling her own
also began to feel uneasy about having a "fake"
developing countries) instead created a interests, and incapable of negotiating
job promotion—she was doing no more work
predicament. If the nonprofits supported the effectively. Your options greatly increase when
and receiving no more pay than she used to, and
legislation, they would be severing ties with you recognize that the other party is not
this made her feel self-conscious with her
their long-standing coalition partner, the irrational, but simply uninformed, constrained,
coworkers. She asked for a raise and voiced her
American farmer. Instead, the nonprofits or focused on interests that you did not
willingness to accept more responsibilities, but
decided that their long-term interests were best anticipate. And as you know, the more options
was quickly denied.
served by opposing legislation. This may still you have, the more effectively you will
seem like a questionable decision on moral,
ethical, or other grounds, but it seems irrational "In negotiation, a wide negotiate.
2. Malhotra, Deepak. (2006). Is Your
only when we overlook the hidden constraints variety of possible Counterpart Irrational . . . Really? Negotiation 9
facing the nonprofits. (3).
The problem of hidden constraints is present constraints exist." Excerpted with permission from Random
in many negotiations. When a firm loses a star House, Inc. Copyright © 2007 by Deepak
Within a few weeks of her promotion,

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Malhotra and Max Bazerman. All rights Random House, Inc., books and authors, see
reserved. For online information about other http://www.randomhouse.com.

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