By Yan Ki Bonnie Cheng
This paper critically evaluates the impact of power and trust on negotiation and decision-making.* “[A] basic fact about negotiation, which could well be easily forgotten, is that [one is] dealing not with abstract representatives of the ‘other side’, but with human beings.” It is therefore unsurprising that human phenomena like power and trust should have a significant influence in the process. These phenomena, however, are broad, complex, and often defined so abstractly that their importance may escape our attention. This paper therefore advocates a more nuanced understanding of power and trust in negotiation and decision-making. Before this is attempted, two major concepts – negotiation and decision-making – will be explained.
Negotiation takes place in a variety of contexts. Thompson defines it as “an interpersonal decision-making process necessary whenever we cannot achieve our objectives single-heartedly.” Looking at international negotiation specifically, Kremenyuk proposes three paradigms to capture what he views as an evolving concept – negotiation as “part of a bigger strategy,” “a means of communication,” and “a decision-making process.” This paper will evaluate the impact of power and trust in these different contexts but will focus on negotiation as a decision-making mechanism.
Power is said to pervade all facets of negotiation. Indeed, the very idea of negotiation intuitively conjures images of power contests and tough bargaining. However, a more comprehensive understanding of power reveals how it actually influences negotiation and decision-making. This section will analyze power as a structure, strategy, and approach to negotiation, and examples of different sources and forms of power will shed light on this complex phenomenon.
A. As structure and strategy
The conception of power as underpinning the basic structure of negotiation originates from the structuralist tradition, which proposes that negotiation begins with a certain distribution of power among the parties. This initial distribution is said to color the entire bargaining process and determine the eventual outcome. For example, studies have shown that stronger countries (such as the United States) typically dominate exchanges with their less powerful counterparts. Based on how much power each party possesses, the structure of a negotiation can be further classified as one of power symmetry or asymmetry. Power asymmetry is the most common structural setting for international negotiation. Trade relations between the global North and South, for instance, are generally seen as asymmetrical given the North’s superior economic power. Structuralists debate as to which power structure, symmetric or asymmetric, is more propitious to effective negotiation.
Structuralist analysis apparently treats power as a fixed resource (like a country’s military clout, or a company’s finances) that parties bring to the negotiating table. This, however, is recognized as too narrow an approach even within the structuralist school. For instance, studies have shown that smaller states, despite inferior structural power, do not necessarily submit to the will of stronger ones. In order to understand this phenomenon, one needs to analyze power as more of a relational and perceptional concept. The relational dimension is captured in Dahl’s definition that “A has power over B to the extent that he can get B to do something B would not otherwise do”. For example, most non-governmental organizations (NGOs) are less resourceful than the World Bank. Yet the Bank can enhance the legitimacy of its programs by including NGOs. Over time, participating NGOs could influence the Bank’s agendas to some extent. Thus viewed, parties with asymmetric resources may well share a mutually dependent relationship.
It is also worthwhile to note that power sometimes lies in the eye of the beholder. A party’s decisions may be shaped as much by its perception of the situation as by objective reality. Zartman and Rubin, in studying power in negotiation, define it as “the perceived capacity of one side to produce an intended effect on another through a move that may involve the use of resources.” They explore how structurally weaker states can actively alter the perception of stronger opponents in order to “level the playing field” through strategic maneuvering. To take an example from the contemporary business world, firms with low aggregate market power often try to shape the perception of business partners and customers to their advantage by highlighting their strengths in specific products and associating themselves with bigger firms.
From the above analysis, it appears that power encompasses more than the static, structural conditions for negotiation. It is also manipulable through “will and skill.” While structural power could be an important edge, the party yielding superior power may not be vigilant about the strategies of the weaker party or motivated to obtain accurate information about the negotiation. In other words, power could well negatively affect the decision-making capacity of its holder. Furthermore, as Fisher and Ury have pointed out, the resources a party owns do not necessarily translate into effective negotiating power, which is much more context-specific. The authors cite the example of the US, which “is rich and has lots of nuclear bombs, but neither has been of much help in deterring terrorist actions or freeing hostages when they have been held in places like Beirut.”
B. As an approach
Having analyzed the structural and strategic dimensions of power, this paper now examines the “power-based” approach to negotiation. According to Thompson, this entails a competitive style of negotiating, with “winning” the contest as the primary goal. The common tactics under a power-based approach include coercion, intimidation, and using one’s status and resources to overpower opponents. In the Cold War summitry between Kennedy and Khrushchev in Vienna 1961, Khrushchev was obviously employing a power-based approach, given his aggressive attitude toward the US president. Returning to Kremenyuk’s terminology, negotiation was then treated as part of a bigger strategy (combined with other strategies like military build-up) to assert the Soviet Union’s supremacy. It was much less of a communication or decision-making tool to Khrushchev.
Many studies show that a power-based approach can be costly and risky. It may give rise to short-term gains but undesirable consequences in the long run. This is because humans tend to reciprocate power and engage in contests when confronted by a hostile opponent. Such confrontation can cause feelings of resentment and even acts of retaliation, which can hinder effective negotiation, damage the parties’ relationship and forestall future opportunities for collaboration. In a labor dispute, for example, the use of a power-based approach by either side can easily result in escalation, stalemate and even labor strikes.
Nevertheless, a power-based approach is not detrimental under all circumstances. For example, power tactics may be necessary or even desirable when there is an impasse between the parties, or when their interests are fundamentally opposed. Using the analogy that “[p]ower in negotiation is about getting a slice of the pie” (i.e. acquiring utilities from the negotiated outcome), Thompson advocates the use of “enlightened power,” whereby negotiators “get a bigger slice of the pie by creating a larger pie” (i.e. exploiting creative opportunities for joint gain). She suggests that parties which are high in power are sometimes oblivious to their weaker counterparts. If weaker parties can strengthen their power strategically, they can potentially influence the stronger parties in ways that enhance mutual gains – for example – by alerting the latter to areas of common interests that were previously unexplored.
C. Sources and forms of power: examples
This section examines three specific sources and forms of power. The first is the power of authority, which is often a kind of structural power. In negotiation on environmental treaties, for example, the scientific community commands a measure of influence because of its authority. Authority usually resides with people in particular positions (“legitimate power”) or with special expertise (“expert power”). Whatever it is called, the essence of authority is that it can be hugely influential, especially in inducing obedience. Cialdini observes how average people submit to authority demands with little conscious deliberation. He finds that even mere symbols (such as titles) could be sufficient to trigger compliance. Authority can thus make people vulnerable to exploitation (when it is used maliciously) or deception (when it is faked).
The second example is concerned with the “best alternative to a negotiated agreement” (BATNA) as a source of power in negotiation. According to Goodwin, a BATNA “sets the value threshold that any acceptable negotiated agreement must exceed.” It is a party’s “Plan B” option other than continuing to negotiate. Fisher and Ury assert that the better one’s BATNA, the more powerful one is. The logic is easy to fathom: an employee with an attractive offer from another company would have greater bargaining strength vis-à-vis his/her current boss, for example. A BATNA can form part of the given structure of negotiation, but it can also be subject to strategic manipulation. In negotiation, not only can a party improve its own BATNA, but it may also alter the objective/perceived value of the other side’s BATNA. China’s strategy to reverse the diplomatic recognition of Taiwan’s allies is an obvious attempt to weaken Taiwan’s political alternatives.
The final example is the threat move, a tactic associated with the power-based approach. North Korea’s leader Kim Jong Il, for example, has been notorious for using threats and provocations to achieve his objectives in the international arena. These are manifested in his tough rhetoric and his build-up and deployment of missiles. For a threat to be effective, it has to aim at the target’s underlying interests, such as a country’s security concerns. It also needs to be perceived as credible – the target must believe the issuer has the ability to carry the threat out. While the target may submit to the issuer in face of a threat – like other tactics under a power-based approach – the use of threats can potentially backfire, risking escalation and relationship breakdown.
There is widespread agreement among scholars that trust is important to effective negotiation. However, a more sophisticated understanding of trust is necessary to understand how it influences negotiation and decision-making in different ways. This paper will first analyze whether trust is a precondition for negotiation. It will then discuss how trust may serve as a goal of and a strategy in negotiation and conclude with two examples.
A. As a precondition
Trust can be defined as “an expression of confidence in another person…that you will not be put at risk, harmed or injured by [his/her] actions.” Thompson sees trust as the “bedrock” of negotiation. This brings to mind the question of whether trust is therefore a precondition for negotiation. In certain situations, the presence of trust is indispensable for parties to negotiate at all. In traditional Chinese business circles, personal trust is so important that businesspeople invest heavily to cultivate it. However, the significance of trust is culture– and context-specific. Claiming that trust is necessary for all kinds of negotiation seems to be an overstatement. To take an extreme example, in negotiation with hostage-takers, there is unlikely to be any trust to start with. Yet this is a situation where negotiation is urgently needed, and one objective of such negotiation is to build at least some mutual trust, so that the hostage-takers will be more willing to communicate their intentions.
B. As an objective
Of course, trust-building per se can be an objective of negotiation. This may stem from the intrinsic value of trust in human relationships. Thompson suggests that a “win-win” negotiated outcome allows negotiators to maximize whatever utilities they care about, and trust can legitimately be one of them. Trust also enables parties to develop and preserve their relationship. For example, a primary goal of the 1985 Geneva summit between Reagan of US and Gorbachev of the Soviet Union was to cultivate certain mutual trust amidst the Cold War climate of suspicion and hostility.
C. As a strategy
Trust can also serve as strategic means to ends other than relationship-building. Trust can offer “integrative potential” and “expand the pie” in negotiation, i.e. enable parties to work collaboratively for joint benefits. In a commercial partnership founded upon trust, parties are more likely to share information, abstain from taking competitive advantage, and engage in longer-run exchange of favors. To take a counter example from the world stage, negotiation between Israel and Hamas in Palestine suffers repeated setbacks partly because of longstanding mutual distrust. The creation or rehabilitation of trust can be difficult, especially against a history of deep-seated mistrust, and substantive conciliatory measures may be required. For example, in 1963 US President Kennedy announced that he was stopping atmospheric tests of nuclear weapons, and this turned out to be a step on the road to détente.
Just as the use of power tactics is not necessarily harmful, trust-based strategies are not universally befitting. By committing to a trust-based relationship, the right to seek competitive advantage may be lost even when the benefits outweigh the costs. Also, as one is likely to act in favor of a trusted counterpart, one’s interests could be jeopardized if trust turns out to be misplaced. Furthermore, “[o]nce we decide that someone is trustworthy, other qualities about that person are conceived as consistent with this favourable impression.” This means humans are prone to the so-called “halo effect,” which occurs when “one positive characteristic of a person dominates the way that person is viewed by others.” The advantages and limitations of trust-based strategies will be further illustrated in the examples below. They will show that the concept of trust intertwines at some point with that of power: a person often holds power vis-à-vis those who places trust in him/her.
D. Types of trust: examples
Identification-based trust is grounded in empathy with another person’s desires and intentions and leads one to “take on the other’s value because of the emotional connection between them.” It often exists among friends. Fostering understanding and friendly ties may therefore be a step to engender identification-based trust. For example, Reagan and Gorbachev developed a cooperative relationship in the late 1980s partly because they had repeated face-to-face talks over the years. Reagan also sought to cultivate a non-hostile atmosphere in these talks by appealing to common interests, actively diffusing tensions and using his sense of humor. Because friendship and liking tend to generate trust and assent – sometimes in a subconscious fashion – Cialdini observes that salespersons often befriend their customers before promoting their products. Trusting someone in certain situations may thus come with risks of manipulation or exploitation.
Deterrence-based trust, on the other hand, is “based on consistency of behavior, meaning that people will follow through on what they promise they are going to do.” Such behavioral consistency is “sustained by threats or promises of consequences that will result if consistency and promises are not maintained.” Such a definition of “trust” sounds somewhat paradoxical; and it certainly has strong connotations of a power relation. Yet it offers an interesting juxtaposition against identification-based trust. Thompson refers to people’s attitudes towards legal contracts and forms of surveillance as examples of deterrence-based trust. Compared with identification-based trust, which operates at the level of intrinsic motivation, deterrence-based trust is more expensive to maintain because it requires external monitoring of people’s compliance. Moreover, backfiring is possible because, psychologically, people often react negatively when they perceive that someone is controlling their behavior or limiting their freedom. Looking at their flipside, the distinction between deterrence-based and identification-based trust resembles somewhat that between hard and soft forms of power.
In conclusion, power and trust are both complex phenomena that can derive from different sources and take multiple forms in negotiation. When deployed as strategies, their strengths and limitations are highly contingent on the negotiation’s context and the parties’ dynamics. As demonstrated above, the two concepts do overlap under certain situations. Given the importance of power and trust in negotiation and decision-making, it is hoped that this paper has offered a more nuanced comprehension of their meanings and implications.
Yan Ki Bonnie Cheng is a Master of Laws (LL.M.) student at Harvard Law School. She can be reached at email@example.com.
*This paper was written in conjunction with the “International Diplomacy” course under the MSc in Global Governance and Diplomacy 2008-09 program at the University of Oxford. I would like to thank Dr. Deborah Goodwin for her comments on the paper.
Victor Kremenyuk, Negotiation Paradigm: Three in One, 12, Paper presented at the First International. Biennale on Negotiation, Paris, 11-12 December. Negotiation as a “part of a bigger strategy” means treating negotiation as a tool to achieve another goal. It forms part of some strategy, such as military or economic strategies.
See The Use of Power in Negotiations (Part I of III), available at http://www.calumcoburn.co.uk/articles/articles-powerone/ (last visited 1 June 2009) and The Use of Power in Negotiations (Part I of III), available at http://www.calumcoburn.co.uk/articles/articles-powerthree/, (last visited 1 June 2009).
See DEBORAH GOODWIN, The Negotiation precipice: the attraction of the aggressive BATNA in modern conflict, NEOCIATION ET TRANSFORMATIONS DU MONDE 137-146 (par Sous la direction de Christophe Dupont, Deuxième Biennale Internationale de la Négociation 2005).