What is the best strategy when negotiating a deal? Should you reveal your time pressures or is it better to hide them? Should you impose deadlines or let conversations run without haste?
On June 29, 2016, EU leaders issued a rallying cry. In response to the UK's historic decision to leave the Union, they made a strategic play designed not only to preserve but also to strengthen and unify the bloc. The game plan was simple yet ingenious: "No negotiation without notification." This meant they would only commence negotiations with the UK once the latter triggered the Article 50 exit clause, effectively setting a two-year countdown clock.
This strategic stance immediately shifted the balance of power. With no pre-negotiations allowed and the clock ticking, the UK was thrust into a high-pressure race against time to negotiate a withdrawal agreement or face the daunting prospect of a no-deal Brexit. This combination of an unforgiving deadline and a potentially catastrophic outcome for the UK only served to fortify the EU's already robust negotiating position.
Deploying time pressure in negotiations requires tact, not force
This scenario showcases the potent role of time pressure in negotiation. Deadlines drive urgency, breaking stalemates, and delays can extract concessions.
Yet, deploying time pressure requires tact, not force. It's an art drawn from a scientific understanding of negotiation dynamics. In this article, I summarize insights from leading negotiation researchers Francesca Gino and Don Moore, along with those drawn from Peter Carnevale's seminal work to help you master the science of the countdown.
Deadlines vs. time costs
Time pressure exerts its influence in negotiations through two distinct facets: deadlines and time costs, both having unique implications.
Think of deadlines as the ticking countdown in a high-stakes movie scene. The protagonist has a finite amount of time to accomplish a task, or else bear the consequence. Similarly, in a negotiation, the final deadline imposes tangible costs on all involved parties if an agreement isn't reached in time.
Last year, when my third son was born, and our downtown Barcelona flat started to feel like a doll's house, we decided to put it up for sale. We set an ambitious price, significantly above the market rate, figuring we had time to see how things would unfold.
Enter a potential buyer who was under the gun. They had secured a competitive mortgage rate from their bank, but there was a catch — the rate was only valid until the end of the following week. This impending expiration date imposed a hard deadline on our negotiations.
Hiding your deadlines in a negotiation can be a blunder rather than a strategic move
If we couldn't strike a deal before the buyer's mortgage offer expired, it was a lose-lose situation for both parties. The buyer might be compelled to look for a less expensive property, given the less favorable mortgage terms they'd be left with post-deadline. And for us, we risked losing a highly motivated buyer who had fallen in love with our place. This could mean settling for a lower offer down the line.
This situation underscores the symmetric nature of deadlines in negotiations: They affect both parties, not just the one with the ticking clock.
When time pressure takes the form of final deadlines, most negotiators assume that their deadlines represent a weakness that's best kept secret. However, research suggests that hiding your negotiation deadlines could be more of a blunder than a strategic move. Why? Revealing your deadline leads to a shared sense of urgency. Your negotiating partner, now aware of the countdown, recognizes the mutual risk of ending up in a stalemate.
This shared understanding propels the negotiation process, lowering demands and encouraging faster concessions. It taps into the primal fear of missing out and creates momentum. By contrast, keeping your deadline secret may leave you isolated, rushing to close a deal while your counterpart, oblivious to the time crunch, moves at a leisurely pace.
The second aspect of time pressure is the concept of time costs. Here, the negotiation is not a ticking time bomb but a taximeter running up costs as time ticks away. Time costs do not impose a strict time limit but make the passage of time expensive. They encompass everything from the missed earnings of employees on strike to the mounting hourly rates of hired professional negotiators or even the opportunity costs of your own valuable time.
But unlike deadlines, time costs don't play fair — they can be asymmetrical. For instance, consider a fast-growing tech startup negotiating a contract with an established software vendor. The vendor is financially stable and can afford a protracted negotiation, but the startup is burning through venture capital and needs a deal swiftly to continue its growth trajectory.
The optimal strategy in a negotiation is to keep time costs hidden
When time pressure takes the form of time costs, research reveals that the optimal strategy isn't to reveal them, as with deadlines, but to keep them hidden. This is especially true when time pressure is uneven and the parties face different time costs. The balance typically tips towards the party with lower time costs. Why? Those with higher time costs often feel compelled to wrap up the negotiations as quickly as possible, potentially making rash concessions. Meanwhile, the party with lower time costs can afford to be patient and use the threat of delays as a bargaining chip to gain more concessions.
So, the ace up your sleeve can be to either maintain lower time costs than your negotiating partner or, at the very least, let them believe that's the case. History offers a shining illustration from the US-Vietnam negotiations in the 1970s, hosted in Paris. The Vietnamese delegation purportedly initiated proceedings by signing a two-year lease on a residence, while their American counterparts booked an upscale hotel with a hefty daily rate.
Revealing your time costs can serve as a strategic edge, but it's a card worth playing only when your actual expenses are less than what your counterpart presumes.
Strategic time pressure: A double-edged sword in negotiations
"Take it or leave it. You've got 15 minutes."
We've all been there, at the receiving end of a firm ultimatum. But should you, as a negotiator, impose such time pressures? As with any strategic tool, there isn't a blanket answer that applies to every situation. It hinges on a variety of factors, like the negotiation context, your counterpart's personality, and the prospects for ongoing relationships.
Deadlining, a tactical maneuver where you intentionally limit time, often accompanied by a pressure-inducing commitment, can be quite effective. This strategy can break the inertia, prompt indecisive parties into decision-making, and potentially yield more significant concessions. Deadlines prove particularly effective when faced with cooperative negotiators or when your counterpart sees clear value in the deal. Additionally, if you are the party with higher time costs, imposing a deadline can work in your favor.
Nevertheless, time pressure is not a panacea. Here are three potential pitfalls to bear in mind:
1. Amplification of prevailing motives
Time pressure often amplifies the existing tendencies of your negotiation counterpart. For cooperative individuals keen on reaching a deal, it might induce more significant concessions. However, when dealing with a less cooperative or indifferent party, it can exacerbate conflicts and disagreements.
2. Emotional consequences
Deadlines can trigger emotional responses like frustration or even anger. You might clinch the deal at hand but leave behind a trail of resentment that jeopardizes future relationships. The victory of today might cost you the battles of tomorrow.
3. Loss of creativity and efficiency
Studies suggest that high time pressure can stifle creativity and result in suboptimal negotiation outcomes. In the face of imminent deadlines, negotiators might rush into decisions, potentially overlooking mutually beneficial, integrative solutions.
In conclusion, time pressure is a potent strategic tool, one that can expedite agreements but can also have unintended ramifications. The challenge lies in balancing the urgency of the immediate deal against the potential impacts on creativity and future relationships.
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