Why are people bad negotiators?

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MBA in a Box: Business Lessons from a CEO

A Complete MBA Training: Business Strategy, Management, Marketing, Accounting, Decision Making & Negotiation

11:28:33 of on-demand video • Updated June 2020

  • Receive an 'MBA in a Box' certificate of completion
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  • Understand how a business functions and what makes a company successful
  • Get promoted and be ready for a managerial role
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  • Be able to perform an industry analysis
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  • Carry out SWOT analysis
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  • Carry out effective marketing research
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  • Set up the 4 Ps of Marketing in a coherent way
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  • Be able to read and prepare the three financial statements - P&L, Balance Sheet, and Cash Flow
  • Perform financial statement analysis
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  • Become a master negotiator
  • Enlarge the pie for all negotiating parties
  • Have experience and be aware of different negotiating tactics
  • Expand the pie for all negotiating parties
English [Auto] In our previous video we mentioned people are often not effective when negotiating. Executives at various management levels make no exception. Often they are unable to perform well at the negotiating table. What is even more interesting is that when asked to evaluate their negotiation ability the large majority of them claim to be good negotiators when only a fraction manage to reach winwin resolutions when tested. So what happens when people underperform during negotiations. They typically end up either leaving money on the table or settling for too little. They might choose to walk away from the table without realizing that whatever is being offered is miles better than any alternative. Or they do the opposite. Settle for terms are much worse than the alternative. In any case the negotiator walks away without realizing the potential of the negotiation and certainly without reaching a win win outcome. Why does this happen. There are three problems. Everyone is susceptible to. You may call them the human curse. These are being egocentric letting bias cloud your judgments and Satisficing. Let's discuss these one by one. Egocentrism refers to the fact that people like to consider their own experiences as better than they in fact are and in themselves flattering way. For example if a class of MBA students were asked to rank their problem solving skills most of them will say that they are better than the average MBA student. This is by default not possible. Susceptibility to bias is another reason why people fall short on the negotiation table. Often when considering their performance during negotiations people choose to pay more attention to instances where they did well and completely ignore areas they might need to improve. They are only interested in the information that would confirm any beliefs they already hold and not dispute them. Although this may seem like a problem that does not have an impact on negotiation outcomes. It does the consequences of bias show themselves in the longer run because having a favorable view of yourself makes you evaluate situations incorrectly and feeds the belief you know a lot and therefore do not need to improve. Another thing about positive bias is it nudges the negotiator to underestimate the importance of background research on their counterpart and lack of information about the players in a deal leads to relying on intuition. During the negotiation and improvising which are dangerously ineffective methods for reaching a win win. Negotiations are a systematic process that demands an adequate level of preparation to be successful as a negotiator. You must be informed and able to anticipate your opponent's actions rather than be uninformed and waiting to react to what they do and allow them to be the one setting the pace. So pay attention to how you perceive yourself in the environment and try to correct any counterproductive ideas. OK so far so good. Third instance of the human curse is Satisficing. This is not as complicated as it sounds. Satisficing is essentially the opposite of optimizing if optimizing is adapting to the situation and trying to gain as much as possible then satisficing is settling for less than what you could otherwise have. When a person satisfice is they failed to take advantage of the situation and usually both bargaining parties suffer some loss as a result. Don't worry if the mechanics are a bit unclear at this point we will outline the whys and hows of the situation in the next few lessons. And since now you know what makes for a lousy negotiator we can begin discussing how to become a great one. Awesome. In the next video we will teach you about the Batla. One of the most important tools you can have in your negotiation toolbox. See you then. And thanks for watching.