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How to Respond to “Take It or Leave It”

https://hbr.org/2020/05/how-to-respond-to-take-it-or-leave-it

hbr.org

How to Respond to “Take It or Leave It”

Have you ever heard one of these statements in the midst of a negotiation?

“That’s the best I can do. Take it or leave it.”

“I simply can’t make any more concessions. Sorry.”

Lots of negotiators use soft ultimatums like these to elicit concessions from the other party, and research shows that they are often

successful
in doing so.

So what can you do when you are at the receiving end of such ultimatums? How can you persist to obtain a better deal for yourself?

Our research identified a surprisingly straightforward way to successfully navigate ultimatums: think about all the choices that you and your negotiation partner have in the negotiation. Or as we think of it, adopt a choice mindset.

A choice mindset is a state of mind in which people have a choice no matter what situation they are in. For example, if a manager says, “I had to fire this employee because of a budget cut — I had no choice,” people in a choice mindset would refuse to believe that the manager did not have any other options, and instead they’d believe that there must be something that the manager could have done to avoid the firing.

We reasoned that negotiators with a choice mindset may similarly believe that the other party must have some options available even if they say that they are at their limit. If this is the case, then when faced with ultimatums, they would ignore the ultimatum, or discount the credibility of the ultimatum, and instead believe that there is still room to negotiate. As a result, they would be more likely to continue negotiating.

In a paper
recently published in Organizational Behavior and Human Decision Processes, we describe six studies that found that asking negotiators to think about all the choices that they and/or their counterpart have leads them to continue negotiating even when they receive ultimatums. This was true in what researchers call “distributive negotiations,” in which one party’s gain is the other party’s loss, and in “integrative negotiations,” in which the two parties can create greater gains for both sides by making tradeoffs between their competing priorities.

One reason why thinking about choices helps people ignore ultimatums is that they believe that there is more room to negotiate, despite what their counterpart says. Within a distributive negotiation, this might mean that negotiators believe that their counterpart is able to make additional concessions. For integrative negotiations, negotiators might believe that there are other issues that haven’t yet been discussed which could yield greater gains. As a consequence, negotiators in a choice mindset received better outcomes in the end. Indeed, we found that the choice mindset improved negotiation outcomes in a wide variety of contexts, such as buying a used car, negotiating a job offer, and negotiating a B2B sale.

For example, in one experiment, we assigned 206 negotiators in the laboratory into pairs, and asked them to negotiate the price of a used car. We instructed one group of car buyers to think about all the choices that the car sellers had within the negotiation, and the other group of car buyers to think about all the constraints that the sellers faced. We found that buyers who were asked to think about the sellers’ choices paid $614 less for the car than those who were instructed to think about the sellers’ constraints.

In a similar experiment, we asked one group of would-be salary negotiators to think about the choices the hiring manager had in providing not just higher pay but in providing better health insurance, less work-related travel, or more vacation days. We found that when the hiring manager told participants that there is nothing more that they can offer, negotiators who were asked to think about choices were more likely to want to persist in the negotiation compared to negotiators who were asked to think about constraints.

Our experiments also revealed that there are specific behaviors that negotiators can do to activate the choice mindset. For example, when planning for a negotiation, you should make a list of all the choices that you believe that you and your counterpart possess. You might write these down on a piece of paper with your choices on one side and the other party’s on the other. Then, bring that paper with you to the discussion to remind yourself of the choices during the negotiation.

Be sure to think broadly about what those choices might be. For example, here is the prompt that we gave to participants in

our used car experiment
: “Now, please think of the choices that the seller has within this negotiation. For example, the seller may have choices in terms of the exact price that they can accept for the car, and they may have choices in terms of their ability to offer you extra car accessories.”

In all our studies, we examined how the choice mindset worked in relatively low-stakes situations, but of course real life is full of many high-stakes negotiations. It’s possible that the stress of a difficult high-stakes negotiation might cause people to forget to focus on choices. Therefore, a prompt ahead of time may not be enough and you may need to make additional efforts to continuously adopt a choice mindset throughout the discussion.

Next time you’re preparing for a negotiation, be sure to think through all the choices that you and your partner have within the negotiation. Instead of caving in response to a “take it or leave it” ultimatum, you may just have the confidence to believe that there is still room to negotiate and get what you want.

Anyi Ma
is a doctoral student at the Fuqua School of Business, Duke University.

Yu Yang
is an associate professor at the School of Entrepreneurship and Management, ShanghaiTech University, China. Before joining ShanghaiTech, he taught at the Johnson Graduate School of Management, Cornell University in the U.S., and the China Europe International Business School (CEIBS) in China.

Krishna Savani
 is the Provost’s Chair in Business at Nanyang Business School, Nanyang Technological University, Singapore.

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