When not to trust your gut

Most negotiators believe they are capable of distinguishing between situations in which they can rely on their intuition, and those that require more careful thought. Unfortunately, they are wrong.

by HBS Working Knowledge
Last Updated: 23 Jul 2013

Professors Max Bazerman and Deepak Malhotra of Harvard Business School argue that too much reliance on intuition can lead to irrational decisions.

They point to the work of Keith Stanovich of the University of Toronto and Richard F West of James Madison University, who have divided thinking into two types: System 1, which relies on intuition, is quick, automatic and emotional; and System 2, which requires more conscious, slow and logical thought.

Most managers and executives tend to rely on System 1 thinking during negotiations, and that reliance increases in situations that are complex and stressful, leading to a state of 'cognitive overload'.

For less important decisions - such as setting deadlines for low-priority tasks - System 1 thought is usually sufficient, while using System 2 may lead to decision paralysis.

A number of strategies are possible to ensure you use the right kind of thinking in negotiations and decision-making: make regular lists of upcoming important negotiations requiring System 2 thought; schedule more time for key negotiations to avoid making intuitive decisions because of time pressures.

People often fall prey to the estate agent's 'we need a decision now' tactic, but there is little reason for feeling guilty about postponing decisions. By extending the negotiations over several sessions, there is more time to rethink. For example, talks can be conducted at first by email, then by phone and then face-to-face, thereby giving yourself time to apply System 2 thought.

Another strategy is to imagine yourself outside the negotiations giving advice to a friend. This helps avoid the common tendency of overconfidence about the prospects of a business deal on which money and futures are staked. Alternatively, seek an outsider with expertise, or a trusted friend, to give a view on important negotiations.

Ask yourself the question: if someone I cared about asked me for my opinion in a negotiation such as this, what advice would I give?

Source: It's not intuitive: strategies for negotiating more rationally
Max H Bazerman and Deepak Malhotra
Negotiation, Vol 9 No 5, May 2006

Review by Joe Gill

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