In this issue of Negotiation Journal, authors focus on some common real‐world concerns: the best way for companies to hire CEOs, how negotiators should handle adversity, and how entrepreneurs can become better negotiators. These articles have implications for practitioners, researchers, and teachers.
In “The Eight Big Negotiation Mistakes that Entrepreneurs Make,” Samuel Dinnar and Lawrence Susskind draw on their forthcoming book that looks at how entrepreneurs do – and should – negotiate their way to bringing innovative new products and services to market. The authors seek to provide practical guidance both for entrepreneurs and for the negotiations experts who work with them.
According to Dinnar and Susskind, entrepreneurs make psychological mistakes (i.e., being overly self‐centered, overly optimistic, or relying too much on intuition) as well as tactical ones (i.e., focusing on winning in the short term or being too quick to compromise). They suggest that entrepreneurs adopt a mix of prevention, reflection, and adjustment when dealing with internal parties (staff, funders, and agents) and external parties (potential customers, suppliers, and others).
Their guidance is designed to help entrepreneurs both avoid mistakes and to recover from the ones they can’t avoid. But perhaps more important is their overarching message: the success or failure of an entrepreneurial undertaking is the product of a series of negotiations in which a new reality is constructed – for the business and, possibly, for society. When these negotiations are more oriented toward mutual gains, not only is the enterprise more likely to succeed, but a more appealing entrepreneurial enterprise will be the result. Entrepreneurs and their firms play outsized roles in this era of innovation and are deserving of additional research exploring the array of critical moments in the life of entrepreneurial firms, assessing just how much of the successes (or failures) of these firms can be traced back to negotiation strategies and tactics in these critical moments.
In their article, “Bargaining with the CEO,” Russell Korobkin and Michael Dorff describe a context‐rich simulation experiment conducted with law school students designed to test the hypothesis that there is a better alternative to the current method that firms use to select a CEO finalist and then negotiate her or his salary. They argue instead that salary discussions should take place with all finalists and that should be an input into the final decision making. They observe that the overall result would be to add downward pressure on CEO salaries without any loss in executive quality.
Their experimental simulation involves a control condition (negotiating salary after a finalist is selected) and two experimental conditions (negotiating salary during parallel conversations with three finalists and requiring each of the three finalists also to indicate a minimum acceptable salary). Variation in which side made the first offer was added as well (which connects to extensive first‐offer research, including studies recently published in this journal). Not only do the more competitive processes yield average salaries that are significantly lower than the control condition, but the reported enthusiasm of the finalists who were selected in the various scenarios did not differ.
This article is exciting because it challenges deeply embedded assumptions in the CEO compensation literature, such as the assumption that ever‐increasing CEO pay must reflect the value he or she is expected to create, that the pool of relevant CEO talent is highly constrained, and, most importantly, that the same talent would not be available for a lower price. Instead, the authors argue that the bargaining process itself is a key factor in determining the ultimate salary, with a higher salary likely when the candidate knows that she or he is the only finalist. Because it is difficult to find instances when the parties actually do negotiate CEO salary before the final selection, the article represents a call to action and suggests that real‐life experiments in alternative approaches could yield improved outcomes for firms.
The vast majority of negotiation simulations used in teaching and research involve one‐time interactions, although a high proportion of negotiations outside the classroom or lab involve repeated interactions. A key feature of the research article by Benjamin Lewis, Mara Olekalns, Philip L. Smith, and Brianna Barker Caza is their examination of perceptions in a second negotiation, following a mix of prior negotiations – some involving adversity and others less so. In their study of “Adversity Appraisal and Subjective Value in Negotiation,” the authors examine how two very different responses to adverse events in negotiations – ruminating on benefits and ruminating on harm – cast shadows forward, affecting subsequent negotiations. Considering the benefits of a difficult negotiation turned out to build resilience and improved participants’ feelings about both the negotiation process and about their negotiation counterparts in a second negotiation.
This study documents how the framing of a negotiation can affect subsequent negotiations. It also contributes to the literature on critical moments in negotiations – the capacity for finding benefits in an adverse situation often involves taking a reflective “time out,” as Daniel Druckman and others have reported. Indeed, the simple manipulation of reflecting back on the beneficial aspects of a recent negotiation could become leading practice to recommend in any repeated negotiation. The authors’ finding that inclusive language also plays a facilitating role following adversity is also a valuable insight for us to highlight in the teaching of negotiations. The finding that such inclusive language had the opposite effect in the less adverse scenario is an unexpected finding and worthy of further study.
The articles in this issue explore deep underlying assumptions about behaviors that fall within a traditional range of more or less competitive behaviors. In our next issue (January 2019), we will push that boundary with a set of articles that seeks to examine the impact of a controversial and less conventional figure in the negotiation world: President Donald Trump. These articles will seek to examine not just Trump the negotiator, but also his impact on the questions we ask about negotiation and how we answer them.
