The Psychology of Decision
Making:
Judgement,
Negotiation & Persuasion
Adrian Furnham
Professor of Psychology
University College London
The Business Case for training
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The ability to influence, persuade, negotiate with others…..
both inside and outside the organisation
upwards, side-ways and down in the organisation
…….is crucial to leadership success
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The most talented manager will underachieve without these skills
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Influencing and judgement skills and techniques
can be taught and need to be practiced
The Business Case for Training
(continued)
Decision, influencing & negotiation skills generalise to other skills……..
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general people management
negotiation
persuasion
selling
….and other contexts
It is a must have!
A Few Questions
1.Is negotiation a different skill from persuasion?
2.Are both primarily “hard” or “soft” skills?
3.Rate yourself on a 10 point scale, where 10 is high, for:
• Negotiation……………..
• Persuasion…………….
4.Describe the characteristics of a good business influencer?
A Few Questions
5.Which do you not have?
6.Do you believe groups are more effective at making decisions
that individuals?
7.What are the specific challenges you are facing at the present
in your role around influence?
The heart and the head
To what extent is persuasiveness a matter of
Analysis, argument and logic
or
Emotions, feelings and intuitions
vs.
Personality vs. Skills
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Are some people born with the ability/aptitude to be able to negotiate
OR
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Are negotiation skills learnt
If they are inherited what are they?
 Emotional Intelligence
 Cognitive ability
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If they are learnt, how and when and where?
At home: we negotiate with our children, our parents and our partners
At work: we have to negotiate with bosses, peers and reporting staff
In the market-place: Where we buy and sell products and services
Personal Style
• Data Driven vs Intuitive
• Risk Averse vs Risk Seeking
• Strategy vs Tactical
Negotiation
Negotiation is a dialogue intended to resolve disputes,
to produce an agreement upon courses of action,
to bargain for individual or collective advantage,
or to craft outcomes to satisfy various interests
An essential skill
Transferable to lots of situations
Relatively easy to learn
Really important in business
Negotiation Tips
A summary of popular books
1. Aim high and go first: the more you ask, the more you get
2. Understand power relations: yours/theirs; imagined/real
3. Try charming, wooing, schmoozing
4. Take calculated risks
5. Remember legitimacy, procedure, rules (the adversary)
6. Dwell on competitor drawbacks and limitations
7. Show commitment to your product, peers, processes
8. Do your homework regarding your opponent: history, values
9. Take time. It’s worth it
10.Keep positive/ upbeat
Negotiation Tips
1. Spot tactics as tactics: don’t react emotionally
2. Final often does not mean it Finalish: Forever-for-now
3. All negotiations can be renegotiated
4. Price is one aspect: there are other satisficers
5. Its not how much you concede but how you concede
6. Leave the other person thinking they got a bargain
7. Beware “funny money” (odd promises/offers)
8. Remember long term relationships
9. Watch out for last minute problems
10.Get written contracts.
Negotiation Tips
11. Spot tactics as tactics: don’t react emotionally
12. Final often does not mean it Finalish: Forever-for-now
13. All negotiations can be renegotiated
14. Price is one aspect: there are other satisficers
15. Its not how much you concede but how you concede
16. Leave the other person thinking they got a bargain
17. Beware “funny money” (odd promises/offers)
18. Remember long term relationships
19. Watch out for last minute problems
20. Get written contracts
False Assumptions
1.
2.
3.
4.
5.
6.
The buyer is usually all powerful
The buyer knows what he/she wants
The price is always the central issue/problem
Competitors dictate your limits
More authority is better in sales
Price cutting is the most powerful weapon
Four Phases in negotiation situations
Preparation
Debating
Proposal
Bargaining
Which is most important?
Which takes longest?
Which is most difficult?
Agreement
Pricing Issues
• Stress the value of long-term benefits versus the upfront costs
• Stress benefits rather than features
• Listen to how they talk and think about money
4 Key Questions in Every Conversation
What are they asking for?
Goal
What do they want?
Need
What will they accept?
At what point will they walk away?
Resistance Point
BATNA
Some Issues to Ponder
1.
People are surprising poor at knowing how good or bad they are
as negotiators: their subjective post-performance rating (how
they feel they did after the negotiation) is only weakly related to
their actual performance in the negotiation
2.
Some people are not sure if they are in the transaction or
relationship business: You have to respect and trust each other
not be friends
3.
Do your homework and always think about your real preferences
and when you are prepared to walk away
Some Issues to Ponder
(continued)
4.
Always focus on the other person’s underlying preferences: the
more you know about their agenda the more powerful you are
5.
Best to go first: to set the agenda, to anchor: start at an acceptable
high rate.
6.
Put your proposals in packages...two or three at a time
7.
Remember to use time pressure to help your case
Influence
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The ability to change the behaviours, beliefs and emotions of other people
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Some people are more influential than others: Why...
personality, skills, training?
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Is it an art or science?
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Think of influential politicians, writers, business people: how do they do it?
The power of moods
Consider how shops, restaurants and organisations use
environmental factors to change you mood and hence your
behaviour:
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Music and sounds
Scents and smells
Light
Temperature
Other people
Personal Style
• Assertive: Respect, understanding and recognition of your
own and others needs and rights.
• Passive: The belief that others needs and rights are more
relevant or salient than ones own
• Manipulative: Being indirect and rather dishonest about
personal needs and wants
• Aggressive: The belief that my needs and rights must take
primacy over those of others.
The Six Universal Principles of
Influence
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Reciprocation
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Commitment and Consistency
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Social Proof
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Liking
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Authority
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Scarcity
1. Reciprocation: How can you use
it?
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I give; you give….we have a powerful behavioural norm to reciprocate behaviours.
Think “free gifts”, charities etc.
Reciprocal favors and concessions
Norms of obligation
No such thing as a free lunch
Start with a big request and then retreat to the smaller (intended) one
Works because people feel an obligation to make a concession to someone who has
made a concession to them.
Free gifts of time, training, consultancy
2. Commitment & Consistency
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We feel the need to be consistent with what we say: get people to declare things.
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The power of getting personal public and emotional commitments.
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Get someone to say yes to a small request so you can have the opportunity to ask for a
larger one.
One of the most widely used techniques by compliance professionals.
People like to be consistent with previous behaviours; the purpose of the small request
is not profit, it is commitment.
Can increase compliance by as much as 200%.
‘Look at it this way - when a person has signed an order for your merchandise, even though
the profit is so small it hardly compensates for the time and effort of making the call, he is no
longer a prospect – he is a customer’ (American Salesman – trade magazine)
3. Social Proof: Where would you go?
• Which of these two is most inviting?
• Others provide us of “proof” that we are making the right
choice
Social Proof: How can you use it?
Do you recycle?
Question:
How would you get more people to recycle their towels during their stay at a
hotel (using the principle of social proof)? How would you improve the standard
approach?
Standard Approach:
“Please put the towels that require cleaning in the bath, and those you can use
again onto the towel rail. This would save us hundreds of litres of water and
detergent on the unnecessary cleaning of towels. By recycling you can help to
reduce environmentally damaging waste”.
Social Proof
• Social Proof Approach:
“Please put the towels that require cleaning in the bath, and those you can use
again onto the towel rail. Most previous guests in this hotel recycled their towels at
least once during their stay”. Increased participation rate by 26%
• Social Proof with Similarity:
“Please put the towels that require cleaning in the bath, and those you can use
again onto the towel rail. Most previous occupants of this room reused their towels
at some point during their stay”. Increased participation rate by 33%
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Tip: use testimonials of similar people to persuade
4. Liking: How can you use it?
Matching & Mirroring
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We are influenced by people who are like us, who seem to like us and behave as
we do
Mirror what they do and match what they say
Be like them and they will like you
We favour those who are like us: the in-group
Waiters increased their tip size by nearly 70% by repeating back a customer’s
order
Tip:
People who mirror body language and match the language are perceived
more likable
Therefore, they are more successful in negotiation situations
as
5. Authority: How can you use it?
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People respond to symbols of authority. Hence the use of “experts”
to endorse products: scientists, practitioners, pop stars
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Make sure to inform the person you’re trying to persuade about your
experience in the subject matter
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Show them you have done your homework and know what you’re
talking about. Don’t be afraid to let people know qualifications
6. Scarcity
• Scarcity of time......last day of the sale
• Scarcity of output....limited issue
• Scarcity of material....precious stones
Influence where you work
In pairs, discuss a situation in which you wish to increase your
influence
• Which of these six factors do you consider to be most
relevant in this situation?
(note it can be more than one)
• What approach will you take to that situation now/or if you
were able to repeat that discussion?
Influence in Groups
• When and why is it advisable to try to make decisions in
groups?
• Does the social influence process in groups makes
outcomes better?
Group Decision Making:
Advantages and Disadvantages
Pooling of
resources
Waste time
Specialisation of
Labour
Group conflict
Decision
acceptance
Intimidation by
group leaders
Advantages
Disadvantages
Group Decision Making
• Should groups be used to make decisions and attempt to
influence others?
• Both advantages and disadvantages are associated with using
groups rather than individuals to make decisions
• Can group influence be bad for individual creativity?
The Decision-Making Process
The Traditional, Analytical Model
Identify the
problem
Define
Objectives
Follow up
Implement
choice
Make a
Decision
Make a
Choice
Generate
Alternatives
Evaluate
Alternatives
Rules for Brainstorming
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Group size should be about five to seven people
No criticism allowed
Freewheeling is encouraged
Quantity and variety
Encourage combinations and improvements
Notes must be taken
The alternatives generated
The session should not be rigidly over-structured by following any of the
preceding seven rules too rigidly
Brainstorming: Unsuccessful for Creative
Problems
Number of ideas generated
Individuals generated
more ideas than groups
Four members or
individuals
Seven members or
individuals
Individuals
Groups
Based on data in Bouchard
Group vs. Individual Performance on a
Complex Learning Task: Experimental
On Conceptually complex tasks,
groups performed better than
either the average individual
or even the best individual in the
group
Mean test performance
90
_
80
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70
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Group
Best
Individual
Average Individual Based on data in
Michaelsen, W
Why is Group Decision Making
Inefficient
Evaluation
Apprehension
Social Loafing
• not pulling
one’s weight
• being scared
of looking foolish
Production
Blocking
•not thinking while
others are talking
Golden Dilemmas
Your objective in this task is to maximise your group’s earnings.
You need to work as a team and agree a strategy to achieve your goals.
Money is earned by making “bids” in accordance with the following rules and constraints.
There will be 8 only “rounds” during which you can make bids.
-----------------------------------------------------------------------------------------------------------------------------------In each round you are to choose either Silver or Gold. The other group will be making their choice at the same time.
If both groups choose Silver, both earn £50
If one group choose Gold and the other choose Silver, the Gold group earns £150; the other group is fined £50
If both groups choose Gold, both groups are fined £10
At the end of 8 rounds the group which has earned most will be awarded a bonus of £100
You may not communicate with the other group during the 8 rounds. However, at the end of round 4 there will be an opportunity for the groups to
meet up to 20 minutes and discuss/negotiate how you will proceed.
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There will be 2 minutes between each round for you to make your next choice. Your choice must be passed to the tutor within this time. Failure to
comply will result in fine.
You may not change your choice once it has been communicated to the tutor.
You may not communicate with the other group apart from the times specified above.
At the end of 8 rounds, if both groups have earned the same amount, the bonus will not be awarded.
You may not do any post-exercise reconciliation of money to any other group.
The Power of Anchoring
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Countries in Africa
Are there more or less than..............countries in Africa
Write down the number..............................
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Population of Ukraine
Is the population of the Ukraine more or less than.............................
Write down the number.............................................