PART ONE: Impact of Emotions in Negotiations
Steve was taken aback. Ted and Sue had come to his law office to talk about a simple breach of contract involving the purchase of residential real property. But Ted was shaking with rage and talking about betrayal, and Sue was near tears because she wanted to see that particular view out her kitchen window for the rest of her life, and now she couldn’t.
The facts were very simple: a developer had more than doubled Ted’s successful offer because the parcel was needed for a shopping mall. The seller could pay Ted and Sue damages and still make a lot of money. It was what Steve’s old professor had called an “efficient breach” of contract. Just plain business and nobody hurt. The case should settle quickly, and everyone could come out ahead. But the way the emotions were building, Steve foresaw years of expensive litigation and no winners at the end.
This story illustrates what those involved in real estate already know: At least in the residential context, things are rarely “just business.” People connect their hopes and dreams to specific pieces of real property, and often get very emotional when those dreams are threatened. The Montana Supreme Court recognized this fact, noting, in a case similar to the vignette above finding that “[plaintiffs] had formed a subjective relationship with the property on a ‘personal-identity’ level,” and therefore suffered emotional distress.1
Even where closing the deal or settling a dispute makes economic sense for all concerned, strong emotions can derail the negotiation process. Yet suppressing emotions impairs our ability to think through the deal. It is therefore crucial to success to be aware of the emotions that arise, the effects they can have, and techniques for dealing with the results. The remainder of this briefly addresses these points.
Why can’t I just ignore the emotions and do the ‘logical’ thing?
Some negotiators advise focusing only on logic and economics, ignoring the emotional aspect of negotiations. Recently, one prominent management institute advised: “There is no need, especially in business, to bring anything personal into the negotiations, no matter what they are about. Emotions and personal opinions should be set aside during all meetings, unless they are asked for.”2
But this advice has serious pitfalls. First, our emotions influence all our judgments, because our brains’ emotional circuits activate before rational minds can process incoming information.3 Second, some negotiations, like those for residential real estate, are especially emotional. Suppressing those emotions can impair a negotiator’s ability to recall details of,4 or reason about5, the matter in dispute. Third, emotional displays can signal underlying needs that have not been met, or significant concerns about the deal on the table.6 Exposing and addressing these needs and concerns can point the way to settlement. Failing to do so will likely lead to the loss of the deal.
Recognizing and knowing how to deal with emotions is important to the savvy negotiator because, whether the emotion will affect both how the emotional party negotiates, and how his or her counterparts respond.7 The effects, in turn, can decrease the likelihood of a successful outcome and a resulting commission. Knowing what to look for and how to respond is the key to success.
Harvard professor Jennifer Lerner researches the effect of specific emotions on the ability to make sound decisions. She has discovered that their various emotions will affect how parties reason, perceive and negotiate. (This is true even if the genesis of the emotion is incidental, that is completely unrelated to the dispute. Professor Lerner calls this effect an “emotional hangover.”8 )
The effect of various emotions on negotiators has been extensively studied. Originally, researchers focused only on the so-called “valence,” or mood, of the emotion – whether it was positive or negative. That research showed that negative emotions make resolution of conflict less likely and positive emotions make it more likely. Specifically:
| TABLE 1 – Results of Emotion on Negotiation
|EFFECTS OF POSITIVE EMOTION||EFFECTS OF NEGATIVE EMOTION|
|Increases cooperation between participants.||Increases competition between participants|
|Increases joint gains from negotiations||Decreases joint gains/increases individual gains from negotiations|
|Decreases hardball negotiating tactics||Increases hardball tactics and defection from common good in pursuit of self-interest. A negotiator with negative affect generally improves his or her individual outcome at the expense of the common good|
|Increases creativity||Increases reliance on logic, economics, rules.|
|Increases concession-making||Decreases offer amounts|
Later work moves beyond simple negotiator mood. Table 2 summarizes several studies focusing on specific emotions rather than simple valence, addressing the effect of each separate emotion on the negotiator and his or her counterparts, and noting common real property situations in which each emotion might arise.10
|Table 2 – Results of Emotion on Negotiation
(Specific Emotion Research)
|EFFECT ON NEGOTIATOR||EFFECT ON COUNTERPART||COMMON CONTEXTS|
|ANGER11||The angry negotiator is overconfident, risk-tolerant, over-eager to act. Feels in control. Objectively, he/she overpays but is pleased. Anger shifts negotiator focus from resolution to anger-producing event. Also, negotiator is less likely to close deal. Blames others.||Anger is a “high status” emotion; Negotiator seen as “tough,” competent. Counterpart in weak position will concede more to angry negotiator than to neutral one; Anger breeds competition, negativity, and a reduced willingness to negotiate in the future. Female negotiator may be seen as “out of control.”||Breach of contract; violation of perceived “deal”; Construction defect; neighbor disputes; eviction; premises liability; foreclosure; short sale. Anger can occur in any situation where there is perceived deception, such as a walk-through or inspection that reveals unexpected problems.|
|FEAR or WORRY12||The fearful negotiator is pessimistic, risk avoidant, and feels out of control. He or she sees the fearful situation as high risk, and is motivated to exit the situation, or change the fear-inducing condition. In addition, fearful negotiators may make concessions or lower demands to avoid angering another.
Fear may turn into anger if another is blamed.
|The fearful negotiator is seen by opponents as incompetent and low-powered. However, displays of fear or worry can lead counterparts to lower their demands or increase offers in an effort to assist the “needy” party.||Fear arises from poor preparation for the negotiation, low power, or poor alternatives to settlement. Also fear is often present in: purchase and sale, eviction, foreclosure, short sale, construction defect, environmental pollution.|
|SADNESS13||The sad negotiator is eager to change the situation, and also distrusting. Feels helpless, or controlled. He or she is willing to sell low and/or buy high in order to complete the process quickly. Spends more than those who are not sad. Sad negotiators are less likely to trust, and more likely to be analytical.||Sad negotiators are seen as weak and incompetent. Though the research is unclear, like fearful negotiators, they may also be seen as needy, leading counterparts to assist them by moderating demands.||Sadness occurs most often in situations of irrevocable loss: Foreclosure, eviction, short sale, probate sale, divorce-related sale, partition of land by court; premises liability leading to serious personal injury or death.|
|DISGUST14||We normally value our own possessions at above their market value. The disgusted negotiator reverses this tendency, undervaluing the disgusting item and seeking to dispose of it quickly. He or she will both pay less to buy and accept a lower price to sell. This effect extends to nearby items perceived as “contaminated.” Disgust is persistent. It responds less to rational argument than other emotions.||There is apparently no specific data on counterparts’ reactions to negotiators’ expressions of disgust. As a negative “valence” emotion, disgust will trigger competition, selfishness, and lower overall gains, as set forth in Table 1.||Disgust arises from the violation of health-related or moral taboos, so the association of a property with such taboo events can cause disgust to be associated with the property. For example, septic tank issues, rodent or insect infestation, toxic waste, mold or a past history of taboo crimes like child abuse.|
|GUILT15||The guilty negotiator suffers low self-esteem as result of his or her violation of social norms – He or she is more likely to be cooperative, increasing concessions and decrease demands, even against self-interest. He or she is less likely to evaluate offers rationally.||While opponents approved of the negotiator who showed guilt, there was no moderation in demands as a result. The counterpart took advantage of guilt-induced generosity, unless some indication that “too much” has been taken (such as expressions of worry) in which case the claiming party might accept lower offers.||Guilt in the real estate context arises most often in the dissolution related disposition of real property, or in a probate context where there is conflict between family members.|
|HAPPINESS16||Happy negotiators are cooperative and creative. They concede more than neutral or negative negotiators, and in a competitive setting, recover less. In a cooperative setting, joint gains are maximized.||Opponents concede less to happy negotiators, who are seen as content with the status quo. Happy negotiators are perceived as weak, with low settlement limits.||Can occur in almost any context, but commonly in purchase and sale transactions or as an emotional hangover.|
Wait, I’m no psychologist. How can I be sure what emotions someone is feeling?
It may seem difficult to work with emotional issues during a negotiation. You might be thinking “Easy for him to say, but I’m no expert.” The fact is that you are. Humans are hard-wired to detect emotions in others.17 Think about it. You can usually tell if someone is angry, sad, or otherwise strongly emotional without exchanging a word. We can all ‘read’ people, and the better we are at reading emotions, the more likely we are to excel at negotiation.18