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Negotiation Skills

Assignment III

Role of Trust, Culture and Reputation in

Negotiation

Submitted by:

Group 2, FMG 21 A

Anurag jain 211027

Apoorv Bajaj 211028

B.V.Vidya Sagar 211037

Deepak Jain 211041

Isha Paroha 211058

February, 8, 2014

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I. Significance of Trust and Culture (also Cross-culture) in

Negotiations

Trust is defines as: “the willingness of a party to be vulnerable to the actions of another party

based on the expectation that the other will perform a particular action important to the

trustor, irrespective of the ability to monitor or control that other party.” Trust and

trustworthiness is responsibility of all the parties.

The expansion of global economic activity has spawned theoretical interest in the impact of

culture on negotiation. People from different national cultures vary in their willingness to

trust one another. Across many interpersonal interactions, Westerners (i.e., North Americans,

Western Europeans) tend to make the ―swift trust assumption: others deserve to be trusted

until they prove otherwise. Easterners (i.e., East and South Asians) generally trust less than

Westerners, but also condition their trust on the situation. A central question raised by this

research is why some cultures, whether Eastern or Western, trust more than others. High- and

low-trust cultures have different mechanisms for controlling behavior.

Cultures in which social norms are clearly defined and reliably imposed tend to enforce

behavioral expectations through monitoring and sanctioning leaving little room for

improvisation or interpretation. In contrast, cultures in which social norms are relatively

flexible and typically propose expectations but permit individuals to define the ―range of

tolerable behavior within which may exercise their own preferences. Thus, enforcement in

loose cultures is left to interpersonal mechanisms.

Research and theorizing articulates the implications for trust: Because institutional

mechanisms govern behavior in tight cultures, individuals from these cultures tend to rely on

institutional trust more than interpersonal trust to control behavior and sanction deviance.

Because interpersonal mechanisms govern behavior in loose cultures, the exact opposite is

true there. Indeed, referring to interpersonal trust, asserts that people in cultures with strong

social norms, ―do not need social intelligence to find out who is trustworthy—trust is not

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needed. Although these individuals may act as if they interpersonally trust , their behavior

largely reflects assurance in institutions.

Negotiations acts to be very effective when there is transparency in the deal and parties share

information about their interest and goals comfortably. In certain cases, trust is the pre-

requisite and it is all the more important when there is a difference of culture. Parties must try

and increase their trust wherever possible but research says that distrust is difficult to shake.

In the negotiation process, information is highly valued and communication style plays a

major role in the results.

In an integrative negotiation trust helps in greater understanding of the situation and

generates solutions which will be acceptable to both the parties. Greater expectation of trust

leads to greater information sharing and vice versa. Greater information sharing leads to

better outcomes due to enhanced knowledge and understanding. Trust is on the front seat in

case of integrative negotiation but takes a back seat in case of distributive negotiation.

It is always advisable to understand the connection between the culture and the negotiation

strategies of the other party. Western culture is mostly individualistic in nature. Autonomy is

highly regarded. Person from individualistic society set higher personal goals in the

negotiation process. They also have tendency to reject less favourable outcomes in the

negotiation process. These outcomes may or may not be acceptable, however the search

continues until a solution is found that suits needs of both the parties.

In a society that is based on collectivism, the identity of a person depends on the

characteristics of the group to which they belong. They are more sensitive to the needs of

others and they approach the negotiation process with the needs of the group in mind. They

are most cooperative when members of a like group interact and more competitive while

negotiating with different groups. Collectivistic cultures tends to be more integrative, greater

information exchange and less competitive.

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II. Key insights from the article “Reputation in Negotiation”

The article “reputation in Negotiation” carves out the importance of reputation in

Negotiation, its tactics and outcomes. It tries to throw light on Negotiation committees and

how they are formed, ways of identification of self reputation, how reputation affects

negotiation tactics and lastly, how to manage your reputation.

Reputation is “the beliefs or opinions that are generally held about someone or something.”

Reputation plays a very important role in negotiations and also reputations are quickly built

in case of negotiations. Reputations substantially affect the negotiation strategies to be used

by the negotiating partners. Negotiation tactics are formed through repeated interactions and

information sharing. Negotiation partners who interact on repeated basis or communicate

develop reputations.

There is lot of importance both first hand reputations and second hand reputation while

considering the negotiation tactics. The first hand reputations include those developed as a

result of direct experience while second hand reputation are those developed as a result of

hearing about someone else’s experience. Reputation raised play significant role in future

negotiations and results

In negotiation, almost all those who are involved have a reputation and which might be first

or second hand. The reputation is based on the interaction and exchange of information. The

article states the study of 105 students at Wharton school shows the emergence of reputations

and its speed of establishment while in negotiation. The study also showed that the

negotiations quickly spread among the students. The students were asked to classify students

under 5 broad categories namely

1. Liar/ manipulator – Will do anything to gain an advantage

2. Tough but honest – Very tough negotiator but doesn’t lie, makes few concession

3. Nice and reasonable – Will make concessions

4. Cream puff – Will make concessions regardless of what you do

5. No particular reputation

Even the statistical test proved good amount consistency and responses and thus there was a

remarkable agreement about other’s reputations.

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Effect of reputation on Negotiation tactics

Further studies were conducted on the results of previous study. One out of which included

providing list of tactics to the students and asking them to indicate as against which

reputation they would use which Tactics. The tactics involved:

1. Beginning with extreme demands

2. Threatening to walk away from the negotiations

3. Evading the questions of your counterpart

4. Asking pointed questions of your counterpart

5. Sharing information voluntarily

6. Making unilateral concessions.

The first four were hardball techniques to be used in distributive negotiations and last two

were for integrative techniques. The study showed that most of the respondents voted for

distributive techniques in case of liar, tough negotiators and cream puff. Distributive tactics

were used as defensive techniques in case of liars and tough negotiators and as offensive

technique in case of cream puff. Against nice and reasonable negotiators, respondents voted

mostly for integrative tactics to help maintaining the environment. The information sharing

was also similar i.e. it was more in case of nice negotiator and lesser in case of tough

negotiators, liars and cream puff.

Managing your Reputations

Shaping and managing own reputation have considerable impact on negotiations. Reputation

changes people attitude towards you. Also it is very important to ascertain which negotiating

style may be effective in a particular situation; however, it is a very complex and difficult. It

is said that moderate reputation is most effective as against having extreme reputations. Also

it is recommended to derive your style based on the style of the partner.

The negotiation style can be reshaped on the basis of the industry you are working in.

Sometimes the result are needed fast and therefore the style is used accordingly. Reputation

can block or make way for positive results.

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III. Implications (during pre-, during and post-negotiations) with

Respect to

Trust

Reputation

Cross-cultural factors in negotiations

TRUST

Sometimes trust is the pre-condition for both parties to have a negotiation at all. For example

if we see Chinese business circles so they claim trust being such an important factor that they

spend heavily to improve it.

However, the presence and importance of trust is culture and context specific. So,

claiming that trust is a prior requirement for pre-negotiation will be an overstatement.

For example, when we consider the scenario of negotiation with hostage takers then

there is no trust absolutely in the initial stage of but as the communication is very

necessary so it becomes that some trust is built in the later stages of the process.

Trust present during the negotiation process helps in achieving the “win win”

outcomes, which further strengthens the trust for next negotiations between the same

parties.

Trust apart from relationship-building can also serve as a strategic means to the

parties. Trust can pave way for an “integrative potential” and can also “expand the

pie” in negotiation, i.e. enable parties to achieve solutions collaboratively for joint

benefits.

For example, the negotiation that takes place between Israel and Hamas in Palestine

suffers consecutive setbacks partially because of longstanding mutual distrust.

The creation or rehabilitation of trust is sometimes challenging, especially against an

experience of deep-seated mistrust, and considerable conciliatory measures may be

required. For example, in 1963 US President Kennedy made an announcement that he

was putting a ban on atmospheric tests of nuclear weapons, and this resulted into a

step on the road to détente.

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Reputation

A player’s reputation is embodied in the beliefs of others about the strategy that player will

use.” Therefore, game theorists define a person’s reputation as opposition’s expectation of

how that person will behave. Psychologists step further back, defining that a reputation is a

coherent image of the nature of someone’s character which then indicates how that person

will behave, subject to situational constraints. We can also say that, reputations not only

suggest how another party will behave in a situation, but also the reason-the why behind that

action —what the underlying intent—due to the nature of that party’s character.

If we assume that there are two broad strategic orientations one takes in a

negotiation— integrative/cooperative and distributive/competitive, there are likewise

two associated reputations a negotiator can develop—integrative/ cooperative or

tough/competitive. An “integrative” negotiator would be someone who is known for

trying to: cooperate, problem-solve, be trustworthy and compassionate, create joint

value, or generally get a deal that works for both (or all) parties. A “distributive”

negotiator would be someone who is known for trying to: be tough, use power, extract

concessions, claim value, or make sure they get a good deal personally.

Reputations evolve over time. Mostly this time is considered to span across different

transactions, in a way that reputations are a way of connecting transactions across

time. For example, even though one may be currently negotiating a more distributive

transaction (e.g., car purchase, raise at work), these discrete transactions will mostly

occur with someone with whom you have already previously negotiated (as a repeat

customer, when working on job assignments), or with whom you may expect to

negotiate in the future.

Culture on Negotiation

Culture can shortly be defined as the way of life. One’s culture is influenced by many socio-

environmental factors around him like the place of origin, his family background, education

etc. The value system, behaviour, knowledge and fundamental beliefs that one develops as

part of his encounter with the above mentioned sociological factors will define one’s culture.

Thus, a person’s culture will have a strong impact/influence on the decisions taken by

him/her at all stages of life and during any negotiation decisions are ought to be taken which

clearly shows that cross-cultural differences among the parties involved play a major rather

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influential role in deciding the outcome of the negotiation. This issue is much more sensitive

in case of negotiations involving international parties.

Jeswald W. Salacuse, a leading expert in negotiations, has found ten ways by which culture

can affect negotiation which are as follows:-

1. Negotiation Goal

2. Negotiation Attitude

3. Personal Style

4. Communication

5. Sensitivity to time

6. Emotionalism

7. Form of Agreement

8. Building an Agreement

9. Team Organization

10. Risk taking

The above mentioned factors have their influence of varying levels on the three different

stages of negotiations which is explained in the following paragraphs as follows:

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1. Pre-negotiation stage:

- Negotiation Goal: This is a important pre-negotiation decision that influences the

way we negotiate. If the negotiation goal is to sign a contract then we just discuss

the issues involved in the negotiation and make a deal as quickly as possible but if

the goal of the negotiation is to form a relationship then the negotiation tends be a

bit informal and take time to build trust with the opposite party. So, it is important

to understand or sense the negotiation goal of the opposite party and change your

style of negotiation accordingly.

- Team organization: Any company follows either a one leader organization or

group consensus based on the country of origin of the company or the value

system it supports which again is dependent on the culture of the country or the

company. This ultimately decides or influences the time taken to approach a

consensus about the negotiation goal or any other terms of the negotiation.

2. During negotiation

- Negotiation Attitude: This is an important cultural parameter that influences the

process of negotiation. If the opposite party is looking for a win-win situation he

will look for a collaborative approach but if he looks for a win-lose situation then

he will not make any concessions thereby resulting in a competitive approach of

negotiation.

- Personal Style: Our culture has a major influence on the personal style we adapt

during negotiate i.e formal or informal. The rules of a formal and informal actions

also vary from culture to culture. For example: Among Americans calling by first

name is a sign of building friendship but addressing Japanese by their first name

during the first meeting itself is a sign of disrespect. So, any negotiator should try

to understand the personal style of the opposite party and try to adapt formal or

informal style as and when required.

- Sensitivity to Time: This is also a crucial cultural factor that influence the pace of

the negotiation and closure of the deal. Americans are said to be highly sensitive

to time thereby adapts a more direct approach of negotiation getting down to

business as quickly as possible but the opposite is the case with Japanese and

Indians where they are less sensitive to time and take their time to close a deal

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thus, helping them to form a strong relationship. So, even this issue should be kept

in mind while one is in the process of negotiation.

- Emotionalism – Some negotiators are highly emotional i.e they show their

emotions quite often during the negotiation while others doesn’t show at all or

uses their emotions judiciously. Culture has a partial influence on emotionalism.

So any good negotiator should use emotions only to an extent that they will

support his argument during the negotiation and helps to get a better result.

- Building an agreement: Some negotiators usually discuss general terms first but

some directly approach the specific issues which is again influenced by culture. If

they are time – sensitive they discuss just the specifics and vice-versa.

- Risk Taking – The culture partially influences the risk taking nature of the

negotiator. It is more of a personality issue but one can’t deny the fact that culture

has partial impact on it. For Examples: Americans are considered to be risk takers

whereas Japanese are said to be risk – averse which ultimately decides the

outcomes of negotiations.

3. Post – negotiation stage

- Communication – Communication plays a crucial role during and after

negotiation and culture has a major impact on the type of communication strategy

one follows. For example: Research indicates that Americans adapt a more direct

approach and give a concrete decision and proposal soon after the negotiation but

it is difficult to get such a concrete response from Japanese negotiators soon after

the first negotiation making them adapt a more indirect approach. Some

negotiators also assume direct style of communication to be a more aggressive

approach.

- Form of agreement: Post-negotiation the agreement can be either specific with

all rules and regulations or it can be on general terms. Americans usually prefer a

specific agreement but Chinese prefer a general agreement because in case of any

dispute the Chinese want to see the relationship and they assume that use of over-

conditional agreement as a lack of confidence on them by the opposite party. So,

the negotiator should keep in mind that if relationship is important than there can

be some lax to an acceptable limit in the agreement but usually a specific

agreement is preferred.

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Reference:

1. Negotiating: the top ten ways that culture can affect your negotiation

by Jeswald W. Salacuse, Ivey Business Journal.