Behavioural Psychology and Negotiation – Counting My Losses!

I spoke at the Peterborough and Cambridge CIPS Branch meeting last week, held at Huntingdon racecourse. An interesting venue and it would have been rather scenic had it not been pouring down all evening. That made the attendance of just short of 40 not bad at all, I thought, and thanks to everyone who turned out.

As well as William Warren from Hays – a separate article to come on his presentation – I spoke about behavioural psychology and its relevance to negotiation. That was a version of the session I did for the BravoSolution Real World Procurement series in 2015/16 in London, Dubai and Abu Dhabi.

It’s a great topic, and lends itself to some audience participation, so we saw how the “endowment effect” works with the aid of a Dutch auction at which I sold a nice bottle of Sauvignon Blanc to a gentleman for just £6.50 (procurement people are a tight bunch, aren’t they? It was an £8.99 bottle …)

There was some doubt about “familiarity bias” – that describes how we feel more comfortable with people and things we know. So, we must be careful in procurement not to favour incumbents and firms we know well during competitive processes.

One delegate simply did not believe that could possibly happen in the public sector because of the rigourous rules and processes. Well, maybe … perhaps we’ll just agree to differ on that. I do accept that familiarity can sometimes breed contempt too. A supplier who doesn’t perform well, or we simply don’t like, might face bias against them when it comes to re-tendering.

Our attitude to risk is another area of interest, although our audience were too analytical to fall into one of the traps that many people do. That is a tendency to “throw good money after bad”. Once we have lost money, we are tempted to try and recover it by taking a risk that we really shouldn’t. But not our procurement audience!

I recommended several books during the session and promised to list them here (although those who attended should get the slides anyway). In terms of general negotiation, my three favourites would be:

Getting to Yes, Fisher and Ury (Harvard Negotiation Project)

The Negotiation Book, Steve Gates

Negotiation for Procurement Professionals, Jonathan O’Brien

Then, if you are at all interested in behavioural psychology for any reason, or indeed you just want to understand how your mind works – how all of our minds work – then you simply must read Thinking Fast and Slow by Nobel Prize winner Dr Daniel Kahneman.

Anyway, if anyone ever accuses me of not giving back to the profession, the evening cost me my losses on the wine, a 4-pack of Twirl (a little prize for a quiz) and a crisp new £5 note, used to demonstrate another interesting psychological point. And no, I’m not billing CIPS for my losses. I’m all heart, you know …

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