Negotiation

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A Newsletter from

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Harvard Business School Publishing
and the Program on Negotiation
Decision-Making and Communication Strategies That Deliver Results at Harvard Law School

ARTICLE REPRINT NO. N0604C

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Is Your Counterpart Satisfied?

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 ACROSS THE TABLE
Is Your Counterpart Satisfied?
Your counterpart’s satisfaction level can swing a deal to either a loss or a large profit.
BY MAURICE E. SCHWEITZER
O NE OF MY MBA STUDENTS recently told me a story that
shows how important it is to ensure that your negotia-
tion counterpart is satisfied. Two customers made pur-
chases at my student’s family’s appliance store. One
customer bought several appliances and negotiated a steep
discount for his business—so steep, in fact, that the store
barely made a profit on the sale. Nonetheless, the customer
left the store feeling dissatisfied, believing he should have
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received an even better deal for purchasing so many appli-
ances at once. Not long after, the customer began to com-
plain about the items he’d bought, insisting on service and
replacements. As a result, the store lost money on a cus-
tomer who felt his large volume of business had created a
windfall for the store.
Soon after this customer made his purchases, a second
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customer bought a single item and received a very small
discount. From this deal, the appliance store made a large
profit, but the customer left the store quite satisfied.
Because he had made a small purchase, he didn’t expect a
large discount and thus he was happy with the discount he
received. This customer went on to recommend the store
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to family members and friends, and ultimately generated a
great deal of follow-up business.
This story illustrates two important principles of nego-
tiator satisfaction. First, your counterpart’s satisfaction
level can swing a deal to either a loss or a large profit. Sec-
ond, your counterpart’s level of satisfaction is a function of
his perceptions of the deal—perceptions that may or may
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not be closely related to reality.
Making a fellow negotiator satisfied is more complicated
than merely offering a more favorable deal. The actions you
take prior to, during, and following a negotiation can pro-
foundly influence your counterpart’s satisfaction. Here I
will look at psychological factors that influence how nego-
tiators perceive outcomes as well as the important role of
the negotiation process in determining satisfaction.
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Why satisfaction matters
Successful negotiators work hard to ensure that when they
and their counterpart leave a negotiation, both sides feel
satisfied with the agreement. Why should you care whether
the other side is pleased with the deal or not? First, because
satisfied negotiators are more likely to uphold the terms of a
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by Harvard is authorized
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deal. Even a lengthy contract cannot cover every possible
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contingency, and the costs of enforcement are high.
Second, if your counterpart is satisfied with the deal, she
is also more likely to seek you out again and recommend
you for future business. The more satisfied she is, the more
cooperatively she will approach future negotiations. Con-
versely, a dissatisfied counterpart is likely to try to “even
the score” during the next round of talks.
You might think that negotiator satisfaction is closely
related to getting a great deal. A better deal should be more
pleasing than an inferior one—right? Not necessarily. After
all, the quality of a deal can be difficult to assess. When
issues are difficult to value or forecast, such as the future
profitability of a newly purchased company, making steeper
concessions to your counterpart may not directly increase
her satisfaction. In fact, as I will explain, making steep con-
cessions can actually decrease the other side’s satisfaction.
Managing your counterpart’s satisfaction
As the following points will demonstrate, ensuring that
your counterpart is satisfied with a particular deal requires
you to manage several aspects of the negotiation process,
including his outcome expectations, his perceptions of
your outcome, the comparisons he makes with others, and
his overall negotiation experience itself.
1. Outcome expectations.
Prior to and during a negotiation, people develop
expectations about the type of deal they will receive. Work
by business-school professors Richard Oliver and Bruce
Barry of Vanderbilt University and Sundar Balakrishnan of
the University of Washington demonstrates that negotia-
tors automatically compare their actual outcome with the
outcome they expected prior to negotiating. As a result of
this process, two negotiators with the exact same outcome
can feel very differently about their deal. For example, con-
sider two car buyers who both purchased the same model
car for $30,000. The buyer who expected to pay $29,000
will be dissatisfied with this deal, while the buyer who
expected to pay $31,000 will be quite pleased.
Skilled negotiators manage expectations prior to and
during a negotiation. Some managers do this instinctively.
For example, in the month prior to salary negotiations
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Satisfying Your Counterpart (continued)
with employees, managers may broadcast the message that wage and benefit concessions but also about how manage-
this has been a difficult year for the company. After having ment is making out.

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their expectations lowered, some employees may be satis- This is a lesson that Donald Carty, former CEO of

fied to receive even a small cost-of-living raise.
Your reaction to an opening offer can also influence
your counterpart’s expectations. By reacting with a sur-
prised look, a laugh, or a flinch, you can lower your coun-
terpart’s expectations about the feasible bargaining zone.
Conversely, by appearing very cooperative or particularly
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American Airlines, learned the hard way in 2003. The air-
line was struggling with an uncertain financial future, and
the management team asked employee unions to cut their
benefits by $10 billion over six years. After protracted
negotiations, the unions finally agreed to wage cuts that
ranged from 15.6% to 23%.

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eager for agreement, you may raise your counterpart’s The unions perceived that this deal was in their best
expectations. interest—until they learned about the special deal that
One common negotiation mistake is to escalate expecta- American Airlines executives had worked out for them-
tions by making a steep concession that could lead the other selves. Six top executives at the airline, including Carty,
side to expect another. Imagine that you’re bidding on a had arranged to earn large bonuses (twice their salary) if
house that has been on the market for they stayed at the company through
some time at a high list price of Be modest about your 2005; the company also set up a special

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$390,000. You like the house but start pension fund for 45 executives in the
with a low offer: $300,000. In response, gains, and commend event that American Airlines filed for
the seller offers a slight reduction from bankruptcy. These perks were dis-
your counterpart for
the list price: $385,000. Hoping to closed in Securities and Exchange
bridge the gap, you make an offer close his hard bargaining. Commission filings made public one
to your bottom line: $340,000. The day after the unions agreed to the wage
seller may misinterpret this move and believe that you can concessions. Outraged, the unions’ leadership rescinded
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easily make another $40,000 jump. Rather than quickly the deal. One week later, Carty was forced to resign.
agreeing to your offer, the seller might escalate her expecta- Social psychologists George Loewenstein at Carnegie
tions regarding likely outcomes. Mellon University, Leigh Thompson at Northwestern Uni-
A related mistake is to agree to your counterpart’s versity, and Max Bazerman at Harvard University have
demands too quickly. Adam Galinsky and Victoria Medvec demonstrated that negotiator satisfaction is affected by
of Northwestern University, Vanessa Seiden of Chicago- social utility—the comparisons that people make between
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based Ruda Cohen and Associates, and Peter Kim of the
University of Southern California studied reactions to ini-
tial offers in a negotiation. They found that negotiators
whose initial offers were immediately accepted were less
satisfied with their agreement than were negotiators whose
offers were accepted after a delay—even if the former
group reached better final outcomes than the latter group.
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their outcome and their counterpart’s outcome. The
American Airlines workers were willing to agree to wage
concessions, but they wanted their sacrifice to be shared
companywide.
In negotiation, we form perceptions about how much
value both sides claim. As the initial American Airlines
deal illustrates, these perceptions can be mistaken. The

Those whose initial offers were immediately accepted were
more likely to think about how they could have attained a
better outcome than were negotiators whose offers were
accepted after a delay.
As these results suggest, you can actually make your
counterpart less satisfied by agreeing too quickly. In fact,
by delaying agreement and even asking for additional con-
cessions, you may be able to make your counterpart more
satisfied with a deal.
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unions were unaware of the type of deal executives would
be getting until management was forced to disclose their
benefits. The lesson? As car salespeople have learned, be
modest about your gains from a deal, and commend your
counterpart for his hard bargaining.
3. Social comparisons.
My own work with Yale psychologist Nathan Novemsky
identifies social comparisons as another critical factor in

guiding negotiator satisfaction. Not only do negotiators

2. Perceptions of your outcome. compare their profit from a deal with the profit they imag-
Just as negotiators evaluate how good a deal is for them- ine their counterpart earned, but they also compare their
selves, they also assess how good a deal is for their counter- profit with the profits of other negotiators who were in a
part. For example, when negotiating a labor agreement, similar situation. For example, a car buyer is likely not only
unions often care not only about how much they gain in to assess how much the dealership made off of him but also

4 Negotiation Aprilis2006
This document authorized for use only by Julia Minson at Harvard Univ. - Kennedy School of Government until
November 2014. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or
617.783.7860.
 Satisfying Your Counterpart (continued)
to compare his price with the deal his neighbor got. If the
buyer’s neighbor bought the same model car for a higher
price, he is likely to be more satisfied with his purchase
than if his neighbor got a better deal.
Social comparisons can drastically skew our percep-
tions of a particular outcome. Unfortunately, our ability to
make comprehensive and accurate social comparisons is
limited. We typically compare our own outcomes with
those who are close to us—neighbors, coworkers, and fam-
ily members. In addition, individuals or organizations
sometimes actively limit our access to information that
could improve the accuracy of our social comparisons; for
example, many companies discourage employees from dis-
closing their salaries to one another. Similarly, your
brother-in-law may choose to tell only you about the
stocks he purchased that increased in value.
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As a negotiator, you need to recognize the limitations
you face in developing a complete and accurate social com-
parison set. In addition, you should seek to guide the com-
parisons that your counterpart selects. When engaged in
labor negotiations, for instance, a management team might
highlight recent labor contracts in which other unions
received less advantageous terms than the union desires.
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4. Negotiation experience.
Research on procedural justice by social psychologist
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November 2014. Copying or posting is an infringement of copyright. Permissions@hbsp.harvard.edu or
617.783.7860.
Jerald Greenberg of Ohio State University has found that
we attach a great deal of importance not only to our out-
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comes but also to how we achieved these outcomes. In par-
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ticular, people feel more satisfied when a negotiation
involves procedures that they perceive to be fair—even
when the outcome is unfavorable for them.
To guide these perceptions, give your negotiation
counterpart a voice in the decision process. Even when
you are in a position of power, be sure to acknowledge
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your counterpart’s perspective and invite him to express
his views, to suggest alternatives, and to react to initial
proposals.
You can also enhance perceptions of fairness after an
outcome has been reached by providing detailed explana-
tions for unappealing actions or outcomes. These explana-
tions, though time-consuming in the short run, can help
your counterpart develop a much more favorable view of
the process—and ultimately save you substantial time and
effort later. !
Maurice E. Schweitzer is an associate professor at the
Wharton School at the University of Pennsylvania.
His research focuses on issues related to trust,
deception, and emotions in negotiations. He can
be reached at negotiation@hbsp.harvard.edu.
Negotiation
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