Negotiation recognition and the process of decision making.

Spears, Martha C. ; Parker, Darrell F.

OBJECTIVE

A basic process of human behavior is the ability to negotiate both in interpersonal and organizational interactions. There is a large body of research on negotiator characteristics and the influence that these characteristics have upon the negotiation process and outcomes.

Much of the existing literature focuses on the negotiation skill and traits associated with achieving a favorable outcome from the negotiation process. This concern for individual efficacy in the negotiation process is consistent with the pressures challenging global business. In the complex environment facing global business, organizations must ensure that employees have the skills necessary to negotiate conflicts.

A potential shortcoming of this line of research is that individuals may differ in their perception of the appropriateness of negotiation, particularly intensive negotiation. Crucial questions that may influence the individual's reaction include how negotiation is defined; whether an individual knows they are involved in a negotiation process instead of a static situation; and to what degree they are perceived to have control of the negotiated outcome. A perceived situational ambiguity may influence who chooses to negotiate. The analysis is similar to the difference between problem recognition and problem solving skills. Recognizing the opportunity to negotiate precedes negotiation.

This paper directly addresses the nature of negotiation recognition in the negotiation process. There are two potential approaches to situational ambiguity. First, it could be treated as a one-dimensional indexed trait like risk aversion. Just as some individuals are more risk averse, perhaps some individuals are more prone to avoid intense negotiation if it might not be appropriate. Alternatively, the appropriateness of negotiation may be a matter of individual perception. If so then different individuals will have different ratings for the appropriateness of a negotiation process. The relationship between these ratings will not show a dominance of negotiators versus negotiation avoiders, but rather a non-transitive ordering of when negotiation is appropriate. Educational and life experience define an individual's outlook on the negotiation process.

LITERATURE REVIEW

John Nash presented bargaining as a nonzero-sum two person game with the opportunity for mutual benefit. How much satisfaction each individual should expect from the situation determines the "solution" to the negotiation (1950). Although Rubin and Brown (1975) defined negotiation as the process of deciding what each will give and take in an exchange, the key element of negotiation occurs "whenever the allocation of gains among participants to an agreement is subject to their own choice rather than predetermined by their circumstances" (Cross, 1969, p 1). Negotiation involves agreements in concert (Conger, 1998), but management educators who teach negotiation recognize that managers often have little experience and very differing views of when negotiation is appropriate (Hastorf & Cantril, 1954; Ross & Ward, 1995, 1996; Pronin, Puccio, & Ross, 2002). Filipczak in 1994 found an estimated $50.6 billion is spent on formal training programs and that there has been a 30-40% increase in training for specific interpersonal skills in the area of negotiation.

Education, gender, and life experience define an individual's outlook on how negotiation is used to control an outcome (Bowles, Babcock, & McGinn, 2005; Stuhlmacher and Walters, 1999; Deaux & LaFrance, 1998; Deaux & Major, 1987; Maccoby, 1990); Kray, Galinsky, & Thompson, 2002;). How an individual views negotiation is an indicator of whether they realize they are involved in a process instead of a static situation, and to what degree they have control of the negotiated outcome (Mead, 1934; Savitsky, Epley & Gilovich, 2001; Chartrand & Bargh, 1999; Davis, 1983; Epley, Savitsky & Gilovich, 2002). Whether a situation is considered a negotiable process is an individual decision often based on preconceived norms. For example, some consumers would never consider a purchase of jewelry at a department store a negotiation process whereas a purchase of the same jewelry at an antique store or flea market would automatically lead to negotiation. An anticipation of a negotiation process sets the agenda for expectations and leads to "levels of disconfirmation and perceptions in regard to negotiation counterparts" (Balakrishnan, Patton, & Lewis, 1993). While one employee thinks that raises and company benefits are open for bargaining, the next employee may have different expectations about whether haggling is possible when discussing these work-place items. Situational ambiguity results in blurring of the limits and appropriate standards for bargaining situations (Bowles, Babcock & McGinn, 2005; Van Lange & Visser, 1999). To this result, not negotiating a starting salary may mean hundreds of thousands of dollars in lost income, especially for those who might gain an advantage simply by knowing that it is acceptable to ask (Babcock & Laschever, 2003). There are mixed conclusions in the research concerning the success of women and men in negotiation (Rubin & Brown, 1975; Thompson, 1990) but some studies suggest that men gain more profits than their women counterparts (Gerhart & Rynes, 1991; King & Hinson, 1994). How decisions are negotiated is determined by the perception of risks involved in the change process and the extent of resistance to change.

This study demonstrates the nature of differences in the recognition of negotiation opportunities by gender and education status.

THEORY OF NEGOTIATION RECOGNITION

The decision of whether to initiate negotiation can be presented as an expected utility maximization problem. The individual must choose between the acceptance of a certain outcome or the probabilistic outcome from negotiation where the weighted payoffs are determined in part by the relative ability to negotiate. In the presence of situation ambiguity the payoffs from negotiation are further discounted based on whether the opportunity to negotiate is recognized.

The formulation of the problem is an extension of the traditional treatment of decision making under uncertainty. For outcomes x and y with probabilities b and (1-b) risk aversion is the situation where:

U(bx+(1-b)y) > bU(x) +(1-b)U(y).

The expected utility function U is concave and the utility from the certain outcome exceeds the expected utility of the gamble. Consumers can be ordered by their degree of risk aversion and reliable measures of behavior developed.

Situational ambiguity in negotiation may manifest itself in three aspects of the probabilistic formulation. First, individuals may differ in their optimism as to the potential gains from negotiation. Thus the 'winning" payout y becomes specific to the individual yi. Similarly the potential downside to negotiation including any potential transaction cost will also be individual specific, xi. Finally, the subjective probability of failure or success, bi and (1-bi) are also individual. Thus each individual faces a unique transformation of expected utility comparing:

U([b.sub.i][x.sub.i]+(1-[b.sub.i])[y.sub.i]) to [b.sub.i]U([x.sub.i]) +(1-[b.sub.i])U([y.sub.i]).

If the differences in perceived situational ambiguity are specific to the individuals self assessment of their negotiation ability or their optimism or pessimism regarding outcomes then one would expect a transitive ordering. That is, individuals with a higher expectation of positive payouts to negotiation yi, would also exhibit higher expectations of success (1-bi) and lower expectations of the cost of failure xi. This would imply the same individuals are more likely to negotiate in any situation. The absence of transitivity implies that the same individual may exhibit confidence in negotiation for some circumstances but reticence in others. Testing this implication is an important precursor to correctly design further research.

METHODOLOGY

The empirical question for the pilot study is whether there is an apparent dominant ordering of individual recognition of negotiation opportunities. If the discounting of negotiation is a one-dimensional variable then the same individuals will always be less likely to view a situation as appropriate for negotiation. Even in this circumstance the one-dimensional index may have some predictable traits such as age and gender. However, when perceived negotiation appropriateness is more complex no single cohort is always the most likely to negotiate. The relative likelihood of negotiation changes with the circumstances.

As a pilot project a survey instrument was developed and administered to a sample of sixty-eight business students. Thirty-five traditional undergraduate students and thirty-three non-traditional graduate students participated. The undergraduate class included twenty-five females and ten males. The graduate class included eighteen females and fifteen males. The respondents were classified by gender and education standing to analyze the responses.

The survey instrument included a series of eighteen items considered to be negotiation processes. Some items were direct market oriented questions such as the purchase price of a new home, or the purchase of jewelry first at an antique shop and then at a department store. Other items involved social contracts such as working on group projects or a marriage proposal. Several items were employment related such as starting salary for a job, work benefits, or work schedule. Each student was asked to identify those they considered a negotiation process.

Variables were created measuring the percentage of respondents choosing the item as a negotiation process for each of the four classifications (undergraduate female, undergraduate male, graduate female, and graduate male). Relationships between the four variables were then analyzed using the Wilcoxon signed-rank test for related variables. The Wilcoxon signed-rank test is a nonparametric alternative to a paired samples t-test. The Wilcoxon signed-rank test detects differences in the distributions of two related variables. The sum of the ranks for the less frequent sign is standardized. Small significance values indicate that the two variables differ in distribution. Four tests were run comparing gender by each class level and comparing class level by gender.

RESULTS

Table 1 shows some descriptive statistics from the survey. The percentage of each classification to consider an item to be a negotiation process is reported. On average undergraduate males were the most likely to select an item as a negotiation process 57.6% of the time. Graduate females were next, followed by graduate males and undergraduate females. However while the average responses are close the particular items that are considered negotiation processes varies by classification. For example, all graduate students and undergraduate males consider the determination of starting salary to be a negotiation. Only undergraduate males see the company benefits as an equally strong negotiation opportunity. The only item that undergraduate males are clearly less likely to see as negotiation is the issue of marriage proposals. To provide a careful comparison of the distribution produced by these responses a pair wise comparison is in order.

Table 2 presents the signed rankings for the data analysis. The absolute differences between the variables are ranked and the ranks are split into three groups. Negative ranks contain those cases for which the value of the second variable exceeds the value of the first variable. For example in the first row there are only five instances where undergraduate females ranked an item as a negotiation process higher than undergraduate males. Positive ranks contain those cases for which the value of the first variable exceeds the value of the second variable. In thirteen cases undergraduate males placed a higher response on a negotiation process than females. Ties contain cases for which the two variables are equal. The undergraduate analysis by gender did not produce any ties.

The differences in recognition of negotiation processes are no doubt influenced by life experiences. The use of non-traditional graduate students provides some proxy for this. The pair wise comparison reveals that graduate females were more likely to think of items as a negotiation process than either undergraduate females or graduate males. Undergraduate males were more likely to think in terms of negotiation than either undergraduate males or graduate males. Thus in the transition between status as an undergraduate and a graduate the genders were moving in opposite directions. Males were becoming less likely to think in terms of negotiation and females were becoming more likely. As a result the position of the genders reversed as shown in Chart 1.

Table 3 reports the test statistics based upon the signed rankings of Table 2. The perceptions of negotiation processes discussed in Table 2 are significant when tested by gender and class status. The difference between undergraduate males and females is significant at the 99% level. The difference between graduate females and graduate males and the difference between graduate females and undergraduate females are both significant at the 95% level. The difference between graduate males and undergraduate males is significant at the 90% level. The graduate female is significantly more likely to view items as negotiation processes than either undergraduate females or graduate males. Similarly undergraduate males are significantly more likely to find negotiation processes than their female counterparts or graduate males. These findings lend support to the conclusion that negotiation research should control for negotiation recognition of the items considered.

IMPORTANCE

This analysis has demonstrated that there are significant differences in whether different activities are recognized as a negotiation process. Significant differences were found by gender and class status. However, the cohort most likely to negotiate still faced items where they were dominated. Had the ordering been universal research on negotiation skills could use a simple control variable based on the complexity and ambiguity of the situation. Since the results demonstrate a non-transitive ordering of the appropriateness of negotiation, research on negotiation ability must control at the individual level for negotiation recognition as well as the underlying negotiation skill. The next stage of the research is validate an instrument to capture the negotiation recognition ability of the individual.

REFERENCES

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Martha C. Spears, Winthrop University

Darrell F. Parker, University of South Carolina Upstate

Table 1: Process response by gender and status

Negotiation Process? G Pcnt F GPcnt M

Purchase of jewelry at an antique shop 94.4 60.0
Starting salary for a new job 94.4 86.7
Purchase price of house 94.4 93.3
Where to go for dinner 83.3 66.7
Raise at present job 83.3 53.3
Conflict with co-workers 72.2 53.3
Group projects 72.2 80.0
"Your place or mine" 66.7 60.0
Work schedule 66.7 73.3
Repair of house plumbing 50.0 26.7
Hotel accommodations 38.9 26.7
Discussion of a grade 33.3 40.0
Company benefits 33.3 40.0
Buying jewelry at a department store 27.8 13.3
Being stopped for speeding 27.8 40.0
Purchase of furniture at a national chain 27.8 13.3
Marriage proposal 16.7 20.0
Clothing purchase at department store 11.1 6.7
Average 55.2 47.4

Negotiation Process? U Pcnt F U Pcnt M

Purchase of jewelry at an antique shop 56.00 63.64
Starting salary for a new job 68.00 81.82
Purchase price of house 84.00 81.82
Where to go for dinner 64.00 72.73
Raise at present job 56.00 90.91
Conflict with co-workers 64.00 63.64
Group projects 72.00 63.64
"Your place or mine" 48.00 72.73
Work schedule 60.00 72.73
Repair of house plumbing 20.00 45.45
Hotel accommodations 36.00 54.55
Discussion of a grade 24.00 27.27
Company benefits 48.00 81.82
Buying jewelry at a department store 28.00 36.36
Being stopped for speeding 40.00 36.36
Purchase of furniture at a national chain 24.00 54.55
Marriage proposal 16.00 0.00
Clothing purchase at department store 24.00 36.36
Average 46.2 57.6

Table 2: Wilcox Signed Ranks Test

 N Mean Rank Sum of Ranks

U_M--U_F Negative Ranks 5 5.10 25.50
 Positive Ranks 13 11.19 145.50

 Ties 0
 Total 18
G_F--G_M Negative Ranks 6 6.25 37.50
 Positive Ranks 12 11.13 133.50
 Ties 0
 Total 18
G_F--U_F Negative Ranks 4 8.75 35.00
 Positive Ranks 14 9.71 136.00
 Ties 0
 Total 18
G_M--U_M Negative Ranks 11 11.45 126.00
 Positive Ranks 7 6.43 45.00
 Ties 0
 Total 18

Table 3: Test Statistics

 U_M-U_F G_F-G_M G_F-U_F G_M-U_M

Z -2.613(a) -2.094(a) -2.199(a) -1.764(b)
Asymp. Sig. (2-tailed) .009 .036 .028 .078

a. Based on negative ranks.

b. Based on positive ranks.

Chart 1
Average Response

 Female Male

Graduate 55.2% 47.4%
Undergraduate 46.2% 57.6%
Gender