Ethical Negotiations: 10 Tips to Ensure Win-Win Outcomes

Peter B. Stark and Jane Flaherty
When we view negotiation from this perspective, we can see how important it is to improve our ability to negotiate so we can be more successful in achieving our goals. What we want to ensure is that when we do negotiate, we do so in a way that will ensure a win-win outcome--one that meets the needs and goals of both counterparts, and makes both of them willing to come back to the bargaining table to negotiate with each other again at a later time. What is the role of ethics in negotiation? The dictionary definition of ethics is: "a system of moral principles or values; the rules or standards governing the conduct of the members of a profession; accepted principles of right or wrong." Ethics establish the means of doing what is right, fair and honest. Why are ethics important in a negotiation? Let’s look at an example. On April 23rd, 2003, Don Carty, the former CEO of American Airlines, ended his 20-plus-year career when he was forced to resign over what the unions considered to be a lapse in his ethics. While Carty was asking rank-and-file employees to take deep pay cuts to save the company, he was also putting together a package that included $41 million in pension funding for 45 executives. If Carty had been upfront with the unions about this arrangement--perhaps explaining that he felt these benefits were necessary to retain an executive team that could help pull American Airlines through the crisis--the outcome may have been different. Instead, the unions got the facts from the press and demanded Carty’s resignation. Reputation plays a vital role in every negotiation. It’s much easier to achieve win-win outcomes when you have a reputation for being fair, honest and willing to do the right thing. A counterpart who feels you are unfair, dishonest or unwilling to do the right thing will be less willing to make concessions or even to begin a negotiation with you in the first place. So guarding your reputation by always acting in an ethical manner is key to successful negotiation. When making any decision, remember this: A reputation takes years to build, and only minutes to destroy. What is the difference between "legal" and "ethical"? Something may be perfectly legal and still not be ethical. I recently sold a rental house to a tenant who had lived in the home for two years. The tenant offered to buy the house for $485,000. I felt the house was worth over $500,000, so I decided to have it appraised. I told the tenant that if the appraisal came in at more than $500,000, he would have the option of buying the house at the higher price. On the other hand, if the house was appraised at less than $500,000, I would decide if I wanted to sell it at the lower price or hang onto it. The appraisal came in at $480,000--$5,000 less than what the tenant had offered me. I thought about not sharing this information with the tenant, and saying something like, "$485,000 is a deal." That thought lasted about one minute. Ethically, I felt I needed tell the tenant about the appraisal price. Then I could decide if I wanted to sell the house for that price or keep it. You can’t be 95 percent or 99.9 percent ethical. You are either ethical or you are not. Would it have been legal for me to keep the appraisal from the tenant? Yes. Would it have been the right
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6. A client recently called to inform us that we had not sent an invoice for services we had performed for her. Knowing what is negotiable and what is not will make you a much more effective negotiator. 4. Sometimes you may encounter negotiators who are unilateral thinkers who have only one option. increase your chances of achieving win-win outcomes. ethical option for accomplishing the same goal. Know what is not negotiable. that costs you something--but it also earns you respect. If a counterpart makes an invoice error that is to your advantage and you inform him of it. "This just smells bad. Ethical negotiators don’t think only about what they can "get" out of a negotiation but also about what they can "give" to their counterpart.thing to do? People for whom the almighty dollar is the highest value would say yes. This is simply not an area that is negotiable." What he was saying was that this 2 . Going into a negotiation with multiple options will help both you and your counterpart achieve your goals. The following 10 tips will ensure that you build all your negotiations on a foundation of ethics-which will. to withhold this information was neither right nor fair. Be honest. but it would not be ethical. In this way. 7. Whenever we work with bank employees. Recently we were in a negotiation with a company and a person in one division of the company suggested that we not inform another division of an action we were planning to take. even when a proposal does not seem ethical--then later they regret agreeing to the proposal. whenever you are ethical and honest even though it costs you something. everyone knows that anyone who steals from a bank would be fired immediately. 1. For me. Be familiar with the law. 3. they take the long-term view. 2. Be willing to say "no. Others worry that saying "no" seems confrontational. you gain points. In short. When in doubt about the law governing some aspect of your negotiation. by the way. 5. With them. They know that a counterpart who walks away from a negotiation feeling successful will be willing to come back and negotiate again in the future. you will be ready with another. You demonstrate your ethics when you fulfill those promises long after the desire to do so has left you. If their way is unethical in your opinion." Some negotiators are quite comfortable looking a counterpart in the eye and saying "no" when they feel something is not right. it’s their way or the highway. you may sometimes make promises and concessions you hadn’t planned to make. That fact will undoubtedly affect all our future negotiations with her. you have only one option--to walk away from the deal. If someone proposes an option you feel is unethical. we love to ask the following question: "How much can you steal from this bank before you get fired?" The question always draws a laugh because. of course. check it out. Ignorance of the law is not a good excuse for unethical behavior. In your eagerness to put a deal together. In a negotiation. Have multiple options. Being willing to say "no" to something that is not right is a great strength. That one telephone call let us know that this client is honest. doing so might be legal. Go with your gut. One counterpart said. Keep your promises.

In negotiations. Practicing ethical negotiations is not only right--it is a wise investment for your future. as some CEOs and CFOs have recently learned. Ethics in Negotiation: some starting thoughts Negotiation is all about meeting one's interests. some of the best deals you will ever make are the ones you did not make. Lowe's. your job is at stake. 2003. Remember to go with your gut instinct.everyonenegotiates. the information reinforced the fact that we had made a great decision.deal point simply did not feel right. the NFL. They travel internationally training leaders. Telling the members of the other division what we were up to. You may the visit their web site at www. remember.com." What made this line so funny was that Gomer Pyle’s surprises were always negative. Practice the concept of "no surprises. the negotiator faces the core ethical issue of negotiation: when are my needs and wants more important than treating this person in a moral or socially acceptable manner? 3 . Putting these tips into use is critical to your success as a negotiator.6468 or by e-mail at peter@pbsconsulting. "Surprise. 9. sales professionals. 8. when we heard negative information about this individual or company. The Golden Rule tells us to treat people the way we would like to be treated." So we have walked away from the deal. since it does not rationalize as well as your head. Their clients include Alcon Laboratories. played by the late Jim Nabors. 10. and procurement specialists in the art of negotiation. All of us have contemplated buying something from an individual. used to draw a laugh whenever he said. Tony Alessandra's The Platinum Rule™ tells us to treat people the way they want to be treated. surprise. Caring about your counterparts enough to treat them the way they want to be treated helps build long-term relationships based on ethics and trust. Wells Fargo and WD-40. was the right thing to do. Follow the Platinum Rule. Peter Barron Stark and Jane Flaherty are co-authors of The Only Negotiating Guide You'll Ever Need. your head may try to rationalize deal points to make your gut feel more comfortable. Be willing to walk away from a deal. My wife is fond of telling me. he deserves to lose. or entering into a business relationship with a company. She's got to learn that I am the manager and I make the decisions here." Gomer Pyle. ). When it comes to effective negotiations. These include explicit goals (I want to get a 5% raise) but also less conscious or public interests (After what he did to me. SONY. Later. Sergeant Carter. When someone else stands in the way. stick it in a jewelry box and put a bow on it. even though we knew they would be adamantly opposed to it. Dr. published in September. and just getting a gut feeling that we should say "no. "If you are going to surprise me. And. Your reputation is at stake. Ralston Purina. surprise.com or contact them by telephone at (877) 727. Virgin Entertainment." Making sure that a negotiation does not contain any negative surprises will reduce the chances of an ethical lapse.

Whatever choice you make may involve significant costs to yourself. there is also a price to pay for withholding information. Ethical judgments are made in social context: The type of work you choose and the type of people you hang out with. who might become a potential client. 2. will eventually shape your ethical choices as a negotiator. Legal Standard for Fraud 4 . You may think you'll never meet someone again but you never know who your company will hire next year. Even if you choose to lie or be unethical. keeping detailed records. drawing up legal contracts. Starting Points Here are some starting points for thinking about ethical choices you face as a negotiator: 1. you may get in the habit of lying or using other tactics that are unnecessarily risky or harmful. illegal or unethical threats and coercion. legal discovery processes. 3. kickbacks. and the anger of feeling mistreated. corruption. think carefully about what kind of friends. etc. preventing parties from participating or selling them out if they aren't at the table. 5. threats or actions of violence. If you care about having honest and forthright relations with others. 4. Relationship is almost always a factor. be honest with yourself --if you are deceptive. bribes. hate-talk. Over time. demeaning other parties/groups of people. certification. In addition to the relationship costs of distrust. to the wider community. a political adversary. Transactional negotiations lend themselves to unethical behavior but even in short one-time interactions. Often the "right" thing to do is not clear.. etc. For example: harmful or cruel treatment of others.. There are many unethical negotiation behaviors besides lying. or being suspicious of them. a useful connection. clients you want to have in your life. you can incur significant business expenses for protective measures such as factfinding. to the other party. And the way you handle negotiations is noticed by the people around you with whom you may have more signficant relationships. relationship matters. and distrust also have a cost While we worry a lot about the price we might pay for being forthright or for extending a measure of trust the other party. colleagues. inspections.. Be aware of tradeoffs: Self protection. you can end up rationalizing your actions to yourself also. lying. "bluffing". ruining someone's reputation without cause.

4. costly. Conditions for Deception If you find yourself in these circumstances. 6. Parties don't have resources to safeguard against deception. 4. unreliable. Reputation information is unavailable.One starting point for ethical choices is "what's legal"? In the US. redress is difficult. Interaction or interdependence between parties is infrequent. 7. fraud is: 1. One party has little to lose or much to gain from deception. (from Richard Shell's Bargaining for Advantage) Of course lawyers can argue for hours about whether an action fits this set of conditions. that can help build and sustain trust between negotiating parties: • • • • • • • • Social and institutional support Building personal relationships and interdependence Laws and regulations Independent sources for facts and evaluation Institutional sources of reputation information 3rd parties Standardized contract mechanisms and norms Affiliations and credentials Ethics in Negotiations: Maybe. If deception is caught. Knowing Misrepresentation (of) Material Facts On which the victim reasonably relies Resulting in damages. 3. 5. Protections that Promote Honesty Mechanisms. be particularly alert to possible deception: 1. 5. Verification is difficult. 2. It's up to you as a negotiator to choose how close to the cliff edge you want to skate. 3. Information asymmetry is great Hard to tell if there is intent to deceive. maybe not 5 . 2. formal and informal. 6.

the small consumer. Unless it was put there intentionally I can only conclude that we have accepted that ethics can be changed depending on the opposition that we face at the negotiating table! Is there a more sure shot way out this grey area? Maybe. was the shopkeeper ethical in trying to peddle a globe for $500 when he was easily willing to let it go for $325? Were his so-called "neighborhood discount". "manager’s good mood" and "slightly nicked" arguments to reduce the price ethical? I agree with Shell that the test boils down to whether one is able to be comfortable in laying down details of one’s behavior in front of others and opening it up to public opinion. maybe not. When he states that he finds the price too high. how does one distinguish beyween the two? A possibility could be the assumption that lying is something uttered specifically with the intent of deceiving someone to get the upper hand. However I wonder if one was to look at the ethical standpoint from an inverse situation. After a few face-saving missions back and forth Stifford gets the globe for $325. the salesman offers him a "neighborhood discount" of fifty bucks. In a perfect world there would be little hard-negotiation: there would be perfect sharing of information. and decide to look elsewhere. Shell quotes the example of Stifford.the small business. recommended reading for the RC Negotiations course. 6 . I was indeed surprised to note that in our own ethics poll there was an option which read "Ethical but only if the other party is perceived to be a hard bargainer". Shell brings out an interesting distinction between lying and bluffing. Ethics in negotiations are open to their own level of interpretation. His own conscience could have served the same objective. In this situation the buyer can and should refuse. Lying is unethical. something that simple due diligence should be able to clear. However then I am surprised that the buyer of a house was also able to successfully sue when the seller claimed to have an alternate buyer at the asking price. Shell wishes that Stifford had not had to lie to get his deal. However I do not believe that Stifford had to publish an article on his behavior to pass Shell’s test with flying colors. I also differ from Shell on his explanation of the reasons why a seller can be accused of fraud if he pretends to have an alternate (higher) offer in order to push through his terms. a man who finds a globe that he really likes in a store.Prashant Agarwal Issue date: 3/12/01 Section: 2010 HarbusPrint It was with a lot of interest that I read the example cited by Richard Shell in his book "Bargaining for Advantage". being unfairly pressured by the professionals. for 500 dollars. and all parties would equitably divide the created value amongst themselves. Stifford claims to have seen something similar in a catalog for $325. Shell suspects that it is because the buyer is the "little person" in the deal . My query would be. while bluffing is "being economical with the truth". he feels. bluffing is acceptable. I agree with Shell that in an ideal world that would have been a nice solution. I can understand this happening when the BATNA of the buyer is psychologically significantly higher (in Shell’s example it was of getting evicted from his shop).

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