Improve Your Negotiations With The 5 Golden Rules.   LEARN THEM

The murder of George Floyd in my hometown of Minneapolis – which I always considered a bastion of tolerance – “Minnesota nice,” right? – recently led to an interesting discussion I had about racial discrimination with a female lawyer friend who grew up in rural Wisconsin.

I argued that systemic discrimination continues to significantly disadvantage minorities in many fields and circumstances. She agreed that discrimination still existed, but felt it was far less common and harmful.

I thus dug into the research on racial discrimination in the negotiation field. Here is what I found, and ways that everyone – no matter their race – can work to counter this virulent and often unconscious prejudice and behavior in negotiations.

The Research:

The seminal study in this area was by Yale University professor Ian Ayres in 1995, who found car dealers made much higher opening offers to black and female buyers than to white men.

The Results:

The result? White men got much better deals. Dealer profit from white men was $362, white women was $504, black men was $783, and black women was $1,237. These differences arose even though the study participants were trained to negotiate off the same predetermined script. 

More recent studies also illustrate this discriminatory negotiation behavior.

  • When identical resumes were submitted for jobs posted in ads for various industries and occupations, those with white-sounding names received 50% more callbacks than those with African-American sounding names. Having a white-sounding name was an advantage equivalent to having 8 more years of experience, according to this 2004 study by Marianne Bertrand of University of Chicago and Sendhil Mullainathan of Harvard.
  • In 2015, American Honda Finance Corporation (AHFC) paid $24 million to minority borrowers in a case where AHFC was accused of racially discriminating against minorities in negotiating their auto loan interest rates, according to the Los Angeles Times. How did this happen? AHFC allowed dealerships to increase their loan’s interest rates by up to 2.25 percentage points without telling the borrower. So its dealers did – and they disproportionately and discriminatorily marked them higher for minorities. Compared to white borrowers, African Americans thus paid more than $250 over the course of their loans, Latinos paid more than $200, and Asian and Pacific Islanders paid more than $150. Crucially, the borrowers had similar credit histories.
  • African American men and white hosts renting their homes on Airbnb were 8% more likely to respond to queries from potential renters with white-sounding names than African American-sounding names with identical profiles, according to a 2015 study by Harvard Business School researchers Benjamin G. Edelman, Michael Luca, and Daniel Svirsky.
  • Baseball cards sold in eBay auctions held by dark-skinned hands were sold for about 20% less than cards held by sellers with light-skinned hands – even though the cards in the dark-skinned hands were objectively more valuable, according to a 2015 study by Ayres, Christine Jolis of Yale Law School and Mahzarin R. Banaji of Harvard.

Bottom line – significant and insidious discrimination against African Americans and others in negotiation exists.

What can each of us do about it? (I am not addressing here what organizations or society can do).

1. Be Strategic

Explicit and implicit bias, discrimination and prejudice – at an individual level – largely results from socially conditioned feelings, behavior and stereotypes that have often manifested themselves over many years. In effect, biased feelings and behavior have become part of many people’s intuition and instincts.

The main solution? Stop negotiating based on those flawed instincts and start negotiating based on the experts’ research. Focus on proven strategies, not gut feelings that will almost certainly be more based on bias and stereotypes than reasoned thought.

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2. Find common interests and build rapport

Psychological and sociological studies since the 1940s have documented how “ingroups” have advantages that “outgroups” lack. In the race area, the ingroup is often whites and the outgroups racial minorities.

The most effective solution here is to redefine the ingroup away from race. For example, one study found that whites at Stanford’s football stadium answered simple requests from other whites far more often than similar requests from African Americans.

But when the African Americans wore shirts with the Stanford insignia on them and approached whites also wearing shirts with the Stanford insignia, they actually got MORE help than whites without those insignias.

Creating a new ingroup – those wearing shirts with the Stanford insignia – eliminated the prejudicial impact.

The answer negotiation-wise is to, regardless of race, find common interests and develop rapport at the start (same college, hobbies, sports, etc.). Creating this new “ingroup” will go a long way toward minimizing the impact of unconscious bias.

 

3. Focus on objective standards

In the eBay study, the value of cards in dark-skinned hands was perceived as less than those in light-skinned hands – despite their true value being objectively more.

What can you do? Focus on objective standards like market value, experts’ opinions, profit margin, precedent, policy, etc., to determine value and your moves. This will minimize the extent race is a factor.

Regular readers will recognize this as my Third Golden Rule of Negotiation – Employ “Fair” Objective Criteria.

4. Decide offer-concession moves based on patterns

In the 2019 study “Bargaining While Black: The Role of Race in Salary Negotiations,” University of Virginia Darden Business School Professor Morela Hernandez and her colleagues found job evaluators were less willing to make concessions to African American than white job applicants. This led to significantly lower starting salaries for those African Americans than similarly situated whites.

Offer-concession decisions make a significant difference. (Recall also that car dealers in Ayres’ classic study started higher with African Americans than whites).

How can you counter this?

Base your moves on the offer-concession patterns prevalent in your environment.

Years ago when I practiced law, plaintiffs’ personal injury lawyers typically made extremely aggressive first moves – and insurance defense lawyers responded in kind. They would then engage in numerous back-and-forth moves until they, in most cases, reached agreement. Experienced lawyers knew this.

In fact, the best lawyers in that field – and some insurance companies – would even track these moves and metrics in an effort to discern their counterparts’ patterns.

This knowledge – and not any unconscious racial bias – informed these lawyers as to how aggressive they should be with their moves. This led to great results, regardless of their counterparts’ race.

 

Latz’s Lesson:  Implicit and explicit racial discrimination and bias exists in negotiations – so counter it with these powerful strategies!

P.S. If you’re interested in practical ways to fight gender bias and sexism in negotiations, check out my new recorded training on that topic. Learn more about it here

 

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Marty Latz is the founder of Latz Negotiation, a national negotiation training and consulting company that helps individuals and organizations achieve better results with best practices based on the experts’ research. He also has two bestselling books Gain the Edge! and The Real Trump Deal: An eye-opening Look at How He Really Negotiates. He can be reached at 480.951.3222 or Marty@LatzNegotiation.com.

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