Business Negotiations – Week 4 Lecture 1

What’s Your BATNA?

Why Do Ethics Matter In Negotiation?

To understand the importance of ethics in negotiation, it is critical to first define what we mean by ethics. Ethics are broadly applied social standards for what is right or wrong in a particular situation, or a process for setting those standards. They differ from morals, which are individual and personal beliefs about what is right and wrong. Ethics grow out of particular philosophies, which aims to define the nature of the world in which we live and prescribe rules for living together. The “hard work” of ethics in practice is figuring out how ethical philosophies differ from one another, deciding which approaches are personally preferable, and applying them to real-world situations at hand. An ethical dilemma exists for a negotiator when possible actions or strategies put the potential economic benefits of doing a deal in conflict with one’s social or moral obligations to other involved parties or one’s broader community.

There are four standards for evaluating strategies and tactics in business and negotiation:

1. Choose a course of action on the basis of results I expect to achieve (an example is the greatest return on investment).

2. Choose a course of action on the basis of my duty to uphold appropriate rules and principles (example is the law or regulation in my industry).

3. Choose a course of action on the basis of the norms, values, and strategy of my organization or community (example is the usual way we do things at this firm).

4. Choose a course of action on the basis of my personal convictions (example is what my conscience tells me to do).

Each of these approaches reflects a fundamentally different approach to ethical reasoning. The first may be called end-result ethics, in that the rightness of an action is determined by evaluating the pros and cons of its consequences. The second is an example of what may be called duty ethics, in that the rightness of an action is determined by one’s obligation to adhere to consistent principles, laws, and social standards that define what is right and wrong and where the line is. The third represents a form of social contract ethics, in that the rightness of an action is based on the customs and norms of a particular community. Last but not least, the fourth may be called personalistic ethics, in that the rightness of the action is based on one's own conscience and moral standards.

Applying Ethical Reasoning to Negotiation

Each of the above-mentioned approaches could be used to analyze various ethical dilemmas that you may encounter in the negotiation process. For example, if you believe in end-result ethics, then you might do whatever was necessary to get the best possible outcome (including lie about an alternative buyer). If you believed in duty ethics, you might perceive an obligation never to engage in deception and might, therefore, reject a tactic that involves an outright life. If you believed in social contract ethics, you would base your tactical choices on your view of appropriate conduct for behavior in your community; if others would use deception in a situation like this, you lie. If, on the other hand, you believed in personalistic ethics, you would consult your conscience and decide whether your need for cash for the upcoming trip justified using deceptive or dishonest tactics.

Ethics versus Prudence versus Practicality versus Legality

Discussions of business ethics frequently confuse what is ethical (appropriate as determined by some standard of moral conduct) versus what is prudent (wise, based on trying to understand the efficacy of the tactic and the consequences it might have on the relationship) versus what is practical (what a negotiator can actually make happen in a given situation) versus what is legal (what the law defines as acceptable practice). When the problem is fully defined, the path to a convincing solution travels through the three modes of analysis: a determination of economic outcomes of potential courses of action; a consideration of legal requirements that bear on the situation; and an assessment of the ethical obligations to other involved parties regarding what is “right” and “just’ and “fair”. 

Ethical Conduct in Negotiation

Why do some negotiators choose to use tactics that may be unethical? An easy answer to the question might be because such negotiators are corrupt, degenerate, or immoral. However, psychological research shows that people tend to regard other people’s distasteful behavior as caused by their own personality, while blaming the causes of their own behavior to factors in the social environment. If, for example, you tried to explain why you as the negotiator might use some questionable tactics in negotiation, you would tend to say that you are a highly moral individual but had very good reasons for deviating from those moral principles just this one time.

Most of the ethical issues that arise in negotiation are concerned with standards of truth-telling, that is how honest, candid, and disclosing a negotiator should be. The attention here is more on what negotiators say or what they say they will do than on what they actually do. Some negotiators may cheat, or steal information from the other party, but most of the attention in negotiator ethics has been on lying and deception. Most negotiators would probably place a high value on a reputation for being truthful. Yet the meaning of truth is very ambiguous, and there is no clear definition on the truth. What one perceives as something to be true, the other one might not necessarily have the same perception. 

Is it all right to use ethically ambiguous tactics? It depends on who you ask. Research suggests that there are tacitly agreed-on rules of the game in negotiation. Some minor forms of untruths, such as misrepresentation of one’s true position to the other party, bluffs, and emotional manipulations may be acceptable by some negotiators while not for others. Furthermore, researchers discovered that negotiators used two forms of deception in misrepresenting the common-value issue: misrepresentation by omission (failing to disclose information that would benefit the other party) and misrepresentation by commission (flat out lying about the common-value issue). 

Why Use Deceptive Tactics? Motives and Consequences

One of the main reasons of why negotiators use deceptive practice is to increase their power in the bargaining environment. Information is a major source of leverage in negotiation. Information has power because negotiation is intended to be a rational activity involving the exchange of information and the persuasive use of that information. Often, whoever has better information, or uses it more persuasively, stands to “win” the negotiation. In fact, it has been demonstrated that individuals are more willing to use deceptive tactics when the other party is perceived to be uninformed or unknowledgeable about the situation under negotiation; especially when the stakes are high. If deception is a way to gain power, that could suggest that negotiators operating from a position of weakness are more likely to be tempted to engage in deception.

A negotiator who uses an ethical tactic will experience consequences that may be positive or negative, based on three aspects of the situation: whether the tactic is effective; how the other person evaluates the tactic; and how the negotiator evaluates the tactic. If effectiveness is taken to mean the production of economic benefit, then there is evidence pointing to the effectiveness of deceptive tactics in certain situations. For example, misrepresenting one party’s interest on an issue that both parties’ value in the same way can generate compromises that lead to favorable outcomes. A second set of consequences may arise from judgments and evaluations by those who are the targets of the tactic. People who discover that they have been deceived or exploited are typically angry, and the victim may seek revenge from the negotiator in future dealings, and may tell other people of this experience. A third set of consequences occur when the other party has truly suffered, and a negotiator may feel some discomfort, stress, guilt, or remorse. This can lead a negotiator to seek ways to reduce the psychological discomfort.

Explanations and Justifications, and How to Deal with Negotiators who Use Deception

Usually, when negotiators apply deceptive tactics, they provide the rationale behind the use of such practices. Very often, negotiators claim that the tactic was unavoidable, the tactic was harmless, it will help to avoid negative consequences, or the tactic was fair and appropriate to the situation. Some of the ways to deal with negotiators who use deceptive tactics include asking probing questions, phrase questions in different ways, force the other party to lie or back off, test the other party, ignore the tactic, or respond in kindness. Negotiators frequently overlook the fact that, although unethical of expedient tactics may get them what they want in the short run, these same tactics typically lead to tarnished reputations and diminished effectiveness in the long run.