Goals and negotiation

25 Goals and Negotiation I(evin Tasa Schulich School of Business, York University Glen Whyte Rotman School ofManagement, University of Toronto Geoffrey f Leonardelli Rotman School of Management, University of Toronto Negotiation is a ubiquitous social activity that for years has been recognized as an important skill in a wide range of organizational domains (e.g., Lax & Sebenius, 1986) Negotiation is ubiquitous, because it is used to accomplish many important tasks including making deals, resolving disputes, allocating resources, making decisions, and solving problems Using a number of different tasks, designs, and contexts, researchers have consistently found that people often fail to recognize the potential for reaching agreements that offer gains for both parties In other words, people often attain outcomes that are not as beneficial as they could have been (Thompson & Hrebec, 1996; Thompson, 1990; Ritov & Moran, 2008) Explanations for these problems are numerous, and tend to focus on intrapersonal characteristics such as power and gender, and interpersonal characteristics such as trust, tactics, and situational constraints (Thompson, Wang, & Gunia, 2010) All of these factors relate to negotiation behavior and outcomes in certain circumｳｴ｡ｮ｣ｾＬ＠ but for the most part they are difficult to control In this chapter, we focus, or rather re-focus, attention on something that every negotiator potentially has control over: the goals they set prior to negotiation Specifically, we examine the extant literature relevant to the effects of goal setting on negotiation We explore the effects of goal setting on the processes and outcomes of negotiation, as well as on the behavior of negotiators We also aim ultimately to provide guidance to negotiators who strive to determine their goals, objectives, and aspirations in what are frequently complex and ambiguous situations We define the term goal conventionally to mean "what an individual is trying to accomplish; it is the object or aim of an action" (Locke, Shaw, Saari, & Latham, 1981) There is no question that goal setting is frequently prescribed in negotiation It is a topic that has a long history in the negotiations literature (e.g., Pruitt & Rubin, 1986; Siegel, 1957; Siegel & Fouraker, 1960) Negotiators are often counseled to determine their goals in advance of meeting with counterparts, because such goals are considered to provide the focus that powers a negotiation strategy Consider, for example, the following advice: "The first step in developing and executing a negotiation strategy is to determine one's goals Negotiators must anticipate what goals they want to achieve in the negotiation and focus on how to achieve those goals Negotiators must consiq.er substantive goals (e.g., money or a specific outcome), intangible goals (e.g., winning, beating the other party, or getting a settlement at any cost), and procedural goals (e.g., shaping the agenda or simply having a voice at the table) Effective preparation requires a thorough, thoughtful 398 Ie Tasa, G Whyte, and G.] Leonardelli approach to these goals; negotiators should specify their goals and objectives clearly This includes listing all goals they wish to achieve in the negotiation, determirllng the priority among these goals, identifying potential multigoal packages, and evaluating possible trade-offs among multiple goals" (Lewicki, Saunders, & Barry, 2011, p 89) At the outset, it is important to note a fundamental distinction in the negotiation literature between distributive and integrative bargaining Distributive bargaining involves the allocation of limited resources between parties with conflicting interests In these situations, each negotiator is usually attempting to clailn as much value as possible, which comes at the expense of the other side Integrative negotiation, on the other hand, involves the search for mutually beneficial outcomes This type of negotiation also involves both the creation and the allocation of limited resources, often by adding and trading off issues between parties with conflicting yet sometimes compatible interests (Bazerman & Neale, 1992; Pruitt, 1981) In integrative situations, negotiators can create value, as well as claim it, and one party's gain is not necessarily at the other's expense (Thompson et al., 2010) Distributive and integrative approaches to negotiation are, in fact, not entirely separable because efforts to create value ｣ｾ＠ facilitate value claiming by resulting in more value to claim, and efforts to create value can affect how it is divided or allocated Lax and Sebenius (1986) noted the tension between value creation and value claiming when they stated: "No matter how much creative problem solving enlarges ｴｨｾ＠ pie, it must still be divided; value that has been created must be claimed" (p 33) To examine the research that has explored empirically the relationship between goals and negotiation, we searched the literature across a variety of types of goals, including, for example, outcome, learning, and stretch goals The specific focus of this search was to examine how goals of all types have been found to influence the processes and outcomes that are characteristic of negotiation An example of a negotiation process might be how trust evolves or how information is exchanged between or among counterparts Negotiation outcomes include the amount of value or benefit created, how this value or benefit is distributed, changes in the quality of the relationship between or among counterparts, satisfaction with the outcome, impasse rates, and frequency or volume of negotiated agreements attained within a specific amount of time We also examined in this context empirical findings on reference-level effects in , negotiation Reference levels or points are a type of goal that is at the core of prospect theory (Kahneman & Tversky, 1979) This research may not necessarily be considered mainstream with respect to work in the domain of negotiation and goal setting, but in our view it is germane to any comprehensive discussion focused on the confluence of these topics Relatedly, we also examine in this paper the empirical research concerning aspects of regulatory focus theory and outcomes in negotiation This research also involves goaldirected behavior, albeit behavior that is promotion versus prevention focused We begin with a review of the empirical literature examining the effects of goals in negotiation Goal Effects in Negotiation Most research on goal effects in negotiation was conducted during the 1980s and 1990s Scholars then were primarily concerned with whether goals of different types and levels of difficulty had an influence on the outcomes of negotiated agreements For example, Goals and Negotiation 399 , Neale and Bazerman (1985) assigned participants to four goal conditions-no goal, compromise goal, challenging goal, and difficult goal-and had them ?articipate in a such ｾ｡ｴ＠ competitive, multi-transaction market simulation The market was ､･ｳｉｾ＠ participants could complete several negotiated transactions durmg a.25 rnmute ｰ･ｮｯｾＬ＠ and each neaotiation had integrative potentiaL Results showed that different goal conditions created differences in performance Most significantly, participants with challenging goals and difficult goals had significantly higher average individual profit per transaction than those with compromise goals or no goals There was, however, an inverse relationship between the difficulty of the assigned goal and the number of transactions completed Finally, when considering joint profit between dyads as a performance outcome, negotiators with the most difficult goal had the lowest level of performance A subsequent study using the same market simulation (Huber & Neale, 1986) also manipulated goal difficulty, this time creating easy, moderate, and ｾ｣ｵｬｴ＠ levels bas.ed on outcomes of prior uses of the simulation Consistent with the earlier ｾｴｵ､ｹＬ＠ negohators assigned difficult goals averaged greater individual profit per transachon than negotiators assigned easy or moderate goals Participants in this stu.dY were also ｡ｳｫ･ｾ＠ to Slffirevise their goals and choose a goal level for subsequent hypothehcal rounds of ｾ＠ ulation Participants initially assigned easy goals raised their goal level, parhcIpants ｾ｣ｵｬｴ＠ goals assigned moderate goals set similar goals, and participants with ｾｴｩ｡ｬ＠ ｾｦ＠ those ｾｳｉｧｮ･､＠ difficult goals, slightly lowered their future goal leveL The ｧｯ｡ｬ･ｶｾ＠ however remained significantly higher than those ongmally aSSIgned easy goals study, Huber and ｎ･｡ｬｾ＠ (1987) extended the focus or: ｧｾ｡ｬｳＮｴｯ＠ ｩｮｾｬｵ､･＠ In a ｦｾｬｯｷＭｵｰ＠ the goals of a negotiation counterpart They argued that ｢･｣｡ｵｳｾ＠ ｮ･ｾｯｨ｡＠ IS an rnterlevels dependent task, it is important to examine the influence of differrng ｾｳｰｬｉ｡ｨｯＮｮ＠ tw? ･ｾｲ＠ studies, they between participants Using the same market simulation as ｾ･＠ replicated the finding that specific and difficult goals led to higher rndiVldual profit than when goals were easy or nonspecific When examining whether agreements ｷ･ｲｾ＠ ･ｾﾭ cient with respect to value creation, Huber and Neale (1987) found that negohahng dyads with moderate goals, or a moderate-difficult disparity, created the most ｾｴｵ｡ｬｹ＠ beneficial deals However, they also found that when negotiating dyads had parhClpants who both had difficult goals, performance did not approach pareto optimality, the most mutually beneficial result White and Neale (1994) used a simulated house purchase negohahon to study the effects of goal asymmetry on negotiated outcomes A noteworthy aspect of the ｳＮｴｲｵ｣ｾ･＠ of the task was the existence of a positive zone of possible agreement (ZOPA) rn which the buyer was willing to pay $10,000 more than the minimum ｾ･＠ seller would accept or $25,000 Each negotiator was assigned a goal (or aspiration) that was eIther Ｄｾｏ＠ away from their minimum acceptable settlement Structurally, negohators were then either in a symmetrical situation with their counterpart (either both close to or far away from their minimum) or in an asymmetrical situation (one far away and one close to their minimum) Results showed that in the asymmetrical condition, the party with value than the aspiration that was farther away from their minimum claimed Ｎｭｾｲ･＠ their counterpart However, the asymmetrical conditions also had SIgnificantly more impasses than did the symmetrical conditions Brett, Pinkley, and Jackofsky (1996) further examined the relahonship between ｧｯｾｳＬ＠ performance, and impasse rates Using a simulated scorable negotiation between a Job 400 K Tasa, G Whyte, and G.J Leonardelli candidate and a recruiter, they found that negotiators assigned a specific andchallenging goal, and negotiators given the same goal combined with an attractive alternative offer, attained higher individual scores and thus claimed more value than those in a control condition Negotiators who were assigned a specific and ambitious goal combined with an attractive alternative also, however, had significantly higher impasse rates Polzer and Neale (1995) expanded the boundary of research on goal effects in negotiation by examining additional factors in two separate studies First, they examined whether negotiators with specific goals could adapt to new information acquired during the course of negotiations better than negotiators with no goals Second, they examined the impact of goal scope on negotiation performance Goal scope in multi-issue negotiation refers to the difference between having one overarching goal versus having subgoals on each issue In study one, subjects participated in an eight-issue negotiation, but each participant was given only six of the eight negotiation issues prior to the start of bargaining D sing a cover story, the experimenters distributed information concerning the remaining two issues to participants shortly after the start of the discussion Results showed that negotiators with specific and challenging goals achieved in this case poorer outcomes than negotiators with do-your-best goals, suggesting they did not revise their goals adequately in the face of new information In study two, using the same negotiation exercise as the first study, Polzer and ｎ･｡ｬｾ＠ (1995) found that negotiation dyads in which both negotiators had one single overarching goal with respect to quality of the agreement had higher joint gains than dyads in which both negotiators had subordinate goals (or goals with respect to each of the eight issues) However, they also found that when results were examined at the individual rather than dyadic level, individuals with subordinate goals outperformed their counterparts who had a superordinate or overarching goal Analysis revealed that this finding was attributable to the success of those in the subordinate condition on the two distributive (win-lose) issues embedded in the simulation The authors also observed that the assignment of overarching superordinate goals created a dilemma for negotiators Whereas dyadic superordinate goals led to more value being created than when goals are mixed, a negotiator is never certain what type of goal their counterpart has This makes the setting of an appropriate goal problematic Zetik and Stuhlmacher (2002) used meta-analysis to synthesize research on the relationship between negotiator goals and negotiated outcomes in the time period 1966 to 1997 Their sample included 22 studies, and strong support was found for the hypothesis that negotiators with specific and challenging goals achieve higher individual profits than counterparts with vague and less challenging goals This main effect for goals and negotiated outcomes in terms of value claimed was found regardless whether the goal was coded as optimal versus suboptimal or whether the goal was coded as a goal versus a no-goal comparison The sample size was also large enough to examine the impact of three important moderators: goal difficulty, participation in goal setting, and the goal difficulty of the negotiation counterpart (called goal symmetry) Results for goal difficulty were consistent with goal setting theory, such that goals of higher levels of difficulty were more significantly related to negotiated outcomes than when goals were less difficult Goal symmetry was also a significant moderator, in that negotiators attained higher profits when their counterpart had relatively lower goals than when their counterpart had equal Goals and Negotiation 401 or higher goals Finally, participation in the goal setting process did not moderate the goal-negotiated outcome relationship These results are in general consistent with the predictions of goal setting theory (Locke & Latham, 1990) Zetik and Stuhlmacher (2002) also noted, however, that caution was warranted before generalizing these results to all negotiations, for several reasons One concern stems from the interdependent nature of negotiation (Walton & McKersie, 1965) In most goal setting research, a participant is performing a task individually against a predetermined benchmark or objective In contrast, a negotiator must consider the perspective of their counterpart as well as their own, and this introduces an element of contextual complexity and interdependence that is missing from most goal setting research An important theoretical distinction is made in the negotiation literature between a negotiator's position and his or her interests Interests as defined by Fisher, Dry, and Patton (1991) underlie and motivate positions Interests refer to or explain the reasons why a negotiator aspires to achieve a particular goal or outcome In contrast, a position taken by a negotiator is a publicly stated request or demand that often describes the desired outcome or goal For example, a request ｦｯｾ＠ a $10,000 raise is conceptually distinct from the reasons behind the request This distinction is significant in terms of effective negotiation, because although it is not always possible to reconcile competing positions (e.g., no raise versus $10,000), reconciling interests between the parties may still be possible and is a hallmark of successful negotiation (e.g., Pruitt, 1981; Thompson & Hrebec, 1996) It is currently unclear how goal setting influences whether or not negotiators successfully reconcile interests or merely accommodate competing positions with those with whom they are interdependently linked It is also unclear how goals relate to perceptions of fairness in negotiation In one study, Ganegoda, Latham, and Folger (2011) primed negotiators to focus on either creating a fair and equitable resolution or doing their best Results showed that negotiators primed to focus' on a justice goal formulated agreements with less profit inequality More work in this area is warranted Another concern stems from the limited dependent variables used in prior research on goals in negotiation, most notably the variable of profit Zetik and Stuhlmacher (2002) argued that we need to know more about the relationship between goals and additional outcomes relevant to the field of negotiation, such as how long negotiations take, whether negotiators agree upon a deal or reach an impasse, and whether goals influence problem solving or flexibility In the rest of this chapter, we elaborate on these and other concerns, discuss research conducted after the publication of the metaanalysis, and provide suggestions for future research on the relationship between goals and negotiation behavior and outcomes Goal Type Focusing on one's goals or target points has been shown to reduce the effects that typically arise when one's counterpart makes the opening offer (Galinsky & Mussweiler, 2001) Such effects include the tendency to anchor on a counterpart's opening offer when making a counteroffer, often to the detriment of the anchored party in terms of value claimed Thus, in distributive bargaining at least, goals appear to focus attention 402 Goals and Negotiation K Tasa, G "Whyte, and G.] Leonardelli on one's own perspective, reduce the likelihood that information favoring one's counterpart will be considered, and increase the amount of value claimed Galinsky, Mussweiler, and Medvec (2002) also found that negotiators who focused on their target price (or goal) outperformed negotiators who focused on what was minimally acceptable to them The former negotiators, however, despite having attained superior outcomes, were less satisfied with their results than the latter negotiators As the discussion up to this point illustrates, goal setting in negotiation has been associated with both positive and negative consequences We suggest that part of the reason for these mixed results is that prior research has focused almost exclusively on narrOw types of ｧｯｾｳＺ＠ specifically, the dichotomous comparison of specific and challenging outcome goals versus a do-your-best condition Outcome versus Learning Goals Most prior research on goals in negotiation has focused on goals that are explicit and known before task performance Examples include trying to attain a certain measurable target or attempting to sell a piece of property for a certain price These types of goals, called outcome goals (or performance goals), focus on the achievement of specific tasks according to certain standards of proficiency (Locke & Latham, 1990) More recently, Winters and Latham (1996) introduced the notion of learning goals, which focus more on the context-specific strategies that lead to successful performance by drawing attention to the task-specific behaviors, information, and strat_ egies needed to perform well They stated: "A learning goal gives individuals the specific assignment to develop strategies to accomplish a task 0"" (p 237) The purpose of a learning goal, in short, is to direct attention to task processes in terms of strategy development and away from task outcome achievement To illustrate this distinction, Seijts , Latham, Tasa, and Latham, (2004) instructed participants in a complex business simulation to either adopt a performance goal (achieve 21 % market share) or adopt a learning goal (identify and implement six or more strategies to achieve market share) Participants in the learning goal condition attained significantly more market share than participants in the performance goal condition and those told to simply "do their best." Thus, in complex situations, learning goals can improve outcomes, whereas in straightforward tasks performance goals will suffice (Seijts & Latham, 2005) Because the purpose of a learning goal in the goal setting tradition is to draw attention to task-specific strategies and behaviors, this type of goal might be most useful when negotiators are inexperienced and have yet to master the fundamental skills required to perform well Bereby-Meyer, Moran, and Unger-Aviram (2004) experimentally created two types of three-person negotiation teams High learning teams were assigned learning goals, induced to hold high learning values, and were encouraged to focus on continuous learning Low learning teams were assigned performance goals, induced to hold low learning values, and were not encouraged to focus on continuous learning Results showed that high learning teams outperformed low learning teams when the task changed from a free-market negotiation task to an integrative negotiation task The effect oflearning goals, however, is unfortunately impossible to isolate in this case because the learning goal manipulation was embedded in instructions that also included information on learning values and continuous learning Tasa, Celani, and Bell (forthcoming) conducted two experiments to examine whether learning goals affect negotiator behavior and outcomes differently from outcome goals The first study used a negotiation exercise that required creative problem solving to O 403 arrive at a negotiated outcome that satisfied the interests of both parties Participants in one role (i.e., the buyer) were given experimental manipulations (learning goal, outcome goal, do-your-best) Their counterparts (i.e., the seller) were not ｧｩｾ･ｮ＠ any ｾｳｴｲｵ｣ｩｮ＠ beyond their normal role instructions Results showed that negotIators WIth learrung goals created more integrative deals, had lower rates of impasse, and were judged by their counterparts to be more cooperative than negotiators given an outcome goal Study two replicated these results using a more traditional simulation (i.e., job candidate versus recruiter) and also found that the learning goal manipulation interacted with negotiator's dispositional goal orientation Results also showed that negotiators with learning goals developed a more complete understanding of their counterpart's interests Despite recognition by negotiation scholars that impasses are a common and often functional occurrence in negotiation, questions about the causes and effects of impasses have surprisingly received only limited empirical attention (White & Neale, 1994; O'Connor & Arnold, 2001) Although research shows that a negotiator's prior impasses increase the likelihood of future impasses (O'Connor, Arnold, & Burris, 2005), it remains unknown whether different types of goals affect impasse rates White and Neale (1994) found that extreme goals led to higher impasse rates, but their goal condition was compared with a do-your-best condition and not a learning goal condition Freshman and Guthrie (2009) recently described the "goal setting paradox," which reflects the empirical obse:i:vation that negotiators who set higher goals tend to perform objectively well but experience lower levels of satisfaction with the outcome and on other subjective measures According to this discussion, negotiators may face a second goal setting paradox The adoption and pursuit of performance goals increase the likelihood of value claiming in zero-sum or distributive situations, whereas the adoption and pursuit oflearning goals increase the likelihood of value claiming and creating when the situation has integrative potential Whether the assignment of learning goals also leads to both e;o.hanced performance but diminished satisfaction would appear to be a question worth explo'ring At the very least, the standard advice to negotiators that they should set high goals early on likely needs to be more nuanced to reflect the context in which it is offered Performance goals have benefits for value claiming in purely distributive situations (e.g., Galinsky et al., 2002) When the issues to be negotiated are vague and uncertain, however, and require more information, learning goals may be more functional Whether such advice should be tempered in contexts where satisfaction with the result, rather than the objective quality of the outcomes, is paramount is in need of further exploration Achievement goals Another type of goal that has received attention in the negotiation literature is rooted in educational psychology (e.g., Dweck & Leggett, 1988) This topic deserves attention here because the labels used to describe phenomena in this literature appear similar, but in fact are different from those used by traditional goal setting theorists In this research, goals are not assigned in advance but instead refer to one's dispositional goal orientation Research in the goal orientation tradition has its origins in the work of Dweck and Leggett (1988), who found that children have two different primary orientations toward demonstrating their abilities Those who believe ability is fixed are described as "entity theorists" and have a performance goal orientation Those who believe ability is malleable are described as "incremental theorists" and have a learning goal orientation (VandeWalle & Cummings, 1997) 404 K Tasa, G Whyte, and GJ Leonardelli Kray and HaseJhuhn (2007) examined the impact of these beliefs, which they called implicit negotiation beliefs, on negotiator performance In a series of studies, they found that incremental theorists tended to claim more value and behave in a more integrative manner than those with entity beliefs Although implicit negotiation beliefs have been shown to influence negotiated outcomes, it should be emphasized that these beliefs are not synonymous with the setting of specific and challenging goals To illustrate, Seljts et al (2004) examined the joint effect of dispositional goal orientation and goal setting by assigning both learning and performance goals to individuals engaged in a complex decision making task In addition to the positive impact of assigned learning goals, they found that one's dispositional goal orientation interacted with the type of goal that was set When a performance goal was set, there was no relationship between goal orientation and task performance However, when a learning goal was set, there was a significant positive correlation between learning goal orientation and task performance These results point to an interaction between goal type and goal orientation Tasa et al (forthcoming) examined the interaction between goal type and implicit negotiation beliefs in a multi-issue negotiation simulation Replicating the pattern found by Seijts et al (2004), results showed that a negotiator's implicit beliefs interacted with goal type When the negotiator had a performance goal, the relationship between implicit negotiation beliefs and outcomes was attenuated However, when a negotiator· had a learning goal, the relationship between implicit negotiation beliefs and outcomes was highly significant, suggesting that learning goals affect outcomes more strongly when a negotiator believes their negotiation skills are malleable Regulatory Focus and Negotiation Goal Setting A central theme in the goal setting literature is that a goal's properties, such as whether they are challenging or difficult, influence what negotiators can achieve Additional research reveals that how individuals approach such goals also influences the process of goal setting, which in turn affects what they can achieve Even though negotiators could have the same desired end, such as claiming maximum value, for example, people can still approach that goal in different ways Regulatory focus theory (Higgins, 1997, 2005) provides a framework for how individuals may approach the same desired end, but could so in two different ways A promotion focus refers to the individual tendency to approach a desired end by defining that end as a hope, wish, or aspiration Such objectives are then pursued by focusing on the achievement of positive outcomes In contrast, a prevention focus refers to the individual tendency to approach a desired end by defining that end as a duty, obligation, or responsibility Such individuals tend to pursue these objectives by focusing on the prevention of negative outcomes Regulatory focus has been shown to affect a wide range of goal-related outcomes (e.g., Forster, Grant, Idson, & Higgins, 2001; Leonardelli, Lakin, & Arkin, 2007; Leonardelli & Lakin, 2010; Shah, Higgins, & Friedman, 1998), and specifically, behaviors and outcomes in negotiations (Appelt & Higgins, 2010; Appelt, Zou, Arora, & Higgins, 2009; Galinsky, Leonardelli, Okhuysen, & Mussweiler, 2005; Gu, Bohns, & Leonardelli, 20ll; Piasentin, Shultz, Wiliness, Fassina, & Uggerslev, 2005; Ten Velden, Beersma, & De Dreu, 2009, 20ll; Werth, Mayer, & Mussweiler, 2006) Most relevant for the present discussion is that regulatory focus affects the negotiator's goal setting process Even if negotiators may want to accomplish the same outcome, those Goals and Negotiation 405 with a promotion focus tend to set their target price, the outcome they hope to achieve, higher than those with a prevention focus (Galinsky et al., 2005, Study 1) In exploring the consequences of this effect further, Galinsky et al examined whether regulatory focus would affect the behaviors of negotiators Past research has revealed that individuals with higher target prices capture more value in negotiated agreements because they tend to malce more aggressive first offers (Galinsky et al., 2002) In two studies and consistent with this past research, negotiators with a promotion focus attained more value in final agreements than those with a prevention focus, and additional data revealed that this greater value was a function of more aggressive first offers Individuals with a promotion focus claimed more value because their first offers reflected aggressive targets Promotion focus thus led to more successful distributive negotiating strategies relative to a prevention focus By logical extension, one may be tempted to conclude that the promotion-focused negotiator's more aggressive approach may lead to worse integrative outcomes, especially when both parties share the same regulatory focus With two aggressive parties striving for the best outcome, it is easy to expect that these parties may be more rigid and less accommodating in the process of reaching an agreement On the contrary, when both parties shared a regulatory focus, those with a promotion focus were more likely to achieve optimal integrative agreements than those with prevention focus (Galinsky et al., 2005) The authors argue that those negotiators with a promotion focus care most about reaching their ideal solution and with that ideal in mind are motivated to flexibly consider different ways of achieving it This argument is similar to the idea that by focusing on a superordinate-goal (Polzer & Neale, 1995), negotiators can more flexibly achieve mutually beneficial outcomes Moreover, this may also be a function of the efforts by promotion-focused negotiators to perceive value in terms of gains or non-gains (Idson, Liberman, & Higgins, 2000; see also Shah et al., 1998; Liberman, Idson, & Higgins, 2005) One puzzling question in this research is why individuals with a prevention focus set less difficult goals· (Galinsky et al., 2005, Study 1) After all, presumably regardless of regulatory focus, individuals still want the same end in terms of claiming value for themselves and thus malcing themselves better off than they were in the absence of a negotiated agreement Why, then, does the prevention of negative outcomes lead to the setting of less difficult goals than the promotion of positive outcomes? Gu, Bohns, and Leonardelli (2011) shed some light on this puzzle Critically, they found that differences in regulatory focus on goal setting were not due to social orientation (i.e., intention to be pro-sOcial or pro-self) Individuals with a prevention focus were just as motivated to cooperate as those with a promotion focus Rather, across three studies, they found that negotiators with a prevention focus are concerned with multiple outcomes-claiming what they themselves can claim, and also preventing the other party from claiming more than they themselves receive Juggling the prevention of these multiple negative outcomes may have weakened their ability as negotiators to more strongly commit to simply one outcome (Kruglanski, Shah, Fishbach, Friedman, Chun, & Sleeth-Keppler, 2002; Soman & Zhao, 20 ll) Prospect Theory Another stream of research relevant to the topic of goals in negotiation is prospect theory (Kahneman & Tversky, 1979, 1984; Tversky & Kahneman, 1992) Prospect theory 406 K Tasa, G Whyte, and G.] Leonardelli is a highly influential descriptive model of individual decision making under risk It describes individual decision making more accurately than normative models of choice, including expected utility theory, because it was built to account for several anomalies of choice that are inconsistent with models of rational choice Three aspects of prospect theory are relevant to the present discussion (Heath, Larrick, & Wu, 1999) First, outcomes including those from negotiation are normally evaluated as changes from a reference point, which may reflect the status quo but which can also reflect goals, expectations, or aspirations Outcomes that are superior to the reference point are gains, and outcomes that are inferior are losses This is consistent with goal theory, which describes goals as both the object of an action and a benchmark from which to determine satisfaction (Locke & Latham, 1990) Goal theory, in contrast, is more explicit in assu.ming that goals as reference points (or otherwise) reflect selfefficacy, past performance, affect, modeling, feedback, incentives, personality, and other factors (see Chapter 9) Second, deviations from the reference point or goal are felt most intensely the closer they occur to it For example, the subjective difference between receiving $900 or $1000 is greater than the subjective difference between receiving $9900 or $10,000 One implication of this diminishing sensitivity is that individuals will display risk aversion when maldng choices in the domain of gains above the reference point, but will display riskseeking behavior when making choices in the domain of losses below it Individuals, according to prospect theory, are considered to be risk averse if they prefer a sure thing over a gamble of equal or greater expected value A third relevant feature of prospect theory is loss aversion, which implies that losses are more unpleasant than comparable gains are pleasing In other words, losses are more salient or psychologically potent than gains of the same magnitude Loss aversion thus means that the desire to avoid a loss will be stronger than the desire to either achieve an equally large gain or avoid an equally large foregone gain Another consequence ofloss aversion is the willingness to take on increased risk to prevent or restore otherwise certain losses Interestingly, only one goal study has compared the effect of degree of positive or negative deviation from the goal on satisfaction, and found the effect to be linear (Locke, 1967) Further, success tended to have a stronger influence on affect than failure The world of professional golf provides a surprising example of a context involving high stakes in which individuals have been observed to work harder to avoid a loss than to achieve a gain relative to a goal Pope and Schweitzer (2011) deduced from loss aversion that players would work harder to avoid a bogey (one stroke over par) then to achieve a birdie (one stroke under) Evidence indeed suggests that players, all things being equal, were 3.6% more successful when putting for par than for birdie The aversion to a bogey or loss on any given hole appears to have induced extra effort to avoid a negative outcome When goals act as reference points in negotiation, most people are likely to perceive or frame a situation in which they are falling short of a goal as a loss even if they are still doing better than they would in the absence of a negotiated agreement Loss aversion may thus be induced, as well as the desire to seek risk in the domain oflosses The perception of loss may mal(e the act of granting concessions painful, and the decision to accept a viable agreement extremely difficult In contrast, positively framed negotiators Goals and Negotiation 407 who are therefore operating above the reference point will be more inclined to offer concessions and are more likely to be successful (Neale & Bazerman, 1985) For example, an offer of a $10,000 increase in salary when one's goal was a $20,000 increase can legitimately be perceived either positively relative to the status quo or negatively relative to the goal Such perceptions have consequences for behavior and outcomes in negotiation Previous work has speculated (e.g., Neale & Bazerman, 1985; Knight, Durham, & Locke, 2001), and recent research demonstrates (Larrick, Heath, & Wu, 2009), that goal setting may affect risk preferences in negotiation For example, Larrick et al (2009) found in three negotiation experiments that, when compared to a "do-your-best" condition, a "specific, challenging goal" condition consistently led to the pursuit of greater risk In short, negotiators motivated by specific and challenging goals chose riskier strategies and preferred riskier gambles than those with !ess ambitious or more vague goals Knight, Durham, and Locke (2001) previously obtained similar results These findings are consistent with the view that goals motivate partly because they provide a basis for performance evaluation (Lewin, Dembo, Festinger, & Sears, 1944; Locke & Latham, 1990) More precisely, a goal in negotiation imbues an outcome with a positive or negative taint depending on where it resides in relation to the goal Loss aversion can thus be induced according to prospect theory, as can the tendency for people to manifest risk-seeldng behavior when choosing between losses versus risk aversion when choosing between gains These processes may encourage individuals to talce excessive risks in the face of a negotiation that is falling short of important goals Beyond evidence from both the lab and the field that negative framing relative to a negotiation goal induces a propensity for risk, negotiators bargaining over losses tend to malce fewer concessions, find fewer integrative agreements, and more often fail to reach agreement than negotiators operating in the domain of gains (Bazerman, Magliozzi, & Neale, 1985: Neale & Bazerman, 1985: Neale & Northcraft, 1986: Neale, Huber, & Northcraft, 1987) Negotiator strategy, efficiency, and performance all appear to some extent to be dependent on reference points and framing effects (Bazerman et al., 1985; Bottom, 1991; Bottom & Studt, 1993; De Dreu, Carnevale, Emans, & Van de Vliert, 1995; Neale & Bazerman, 1985; Neale, Huber, & Northcraft, 1987; Olekalns, 1994) When using a high reference point and thus likely a negative or loss frame with respect to an evaluation of the outcomes, negotiators concede less, use more contentious but risky moves such as threats, and are in general less inclined to agree than those negotiators who are using a lower reference point that may induce the perception of a positive or gain frame with respect to the outcomes These effects are attributable to variable risk preferences that exist above and below the negotiator's reference point, and to loss aversion (Kahneman, 1992) Kahneman and Tverslcy (1995) have also referred to the impact ofloss aversion in negotiation as concession aversion If concessions that increase a negotiator's perceived losses (or distance below the goal) are more painful to malce than concessions that reduce a negotiator's perceived gains (distance above the goal), it seems likely that a negatively framed negotiator will be particularly reluctant to make concessions In contrast to the findings above, Bottom (1998) found something different in two experiments These studies examined the impact of reference points on negotiator tactics, concessions, and settlements in the context of uncertainty with respect to the final outcomes of negotiated agreements In these studies, negotiators reaching an agreement 408 K Tasa, G Whyte, and G.] Leonardelli would have to gamble to determine how much money they would receive or pay as a result of the agreement Consequently, reaching a settlement created risk for negotiators If negotiators are in the domain oflosses, they should be risk seeking and thus eager to settle with this type of outcome Negotiators in the domain of gains, in contrast, should be risk averse and thus reluctant to settle In the context of risky outcomes, negatively framed negotiators were found to be more cooperative and more likely to settle, and negotiated more integrative agreements than positively framed negotiators When negotiation involves large uncertainties with respect to the ultimate consequences of agreement, which is often the case in complex negotiations, then according to Bottom (1998) the risk-seeking propensity associated with below-goal performance actually leads to more cooperative negotiation and an increased chance of agreement Northcraft, Brodt, ap.d Neale (1995) found that a negotiator will value an opponent's concessions more heavily when they occur in the vicinity of the negotiator's reference point or goal In addition, according to loss aversion, a negotiation opponent's concessions will likely mean more to a negotiator when they reduce a negotiator's losses or distance below the goal than when they increase his or her gains or distance above the goal (Northcraft et al., 1995) In the section to follow, we provide suggestions about possible future research directions for goal setting as it relates to negotiation We also describe some of the implications of the research we have discussed in this chapter for negotiation and negotiators Future Research Directions and Implications for Practice The research conducted to date supports the conclusion that a negotiator with a specific and challenging goal attains greater profit than a negotiator with vague or easy goals when the negotiation is a distributive or zero-sum situation Beyond this type of situation, however, the result of setting a goal prior to negotiation becomes less straightforward Although goals have been positively associated with individual gain, researchers have also found that goals can hinder value creation and adaptability There are thus pitfalls that need to be considered as negotiators consider their goals Our review of the literature on goal setting in negotiation highlights many unanswered questions that unfortunately limit our ability to provide practical advice to negotiators Many of these questions deserve greater scholarly attention A number of future research directions are implied by our discussion of empirical findings concerning the effects of goal setting on the processes and outcomes of negotiation A reasonable first step would be for researchers to consider the impact of goals on outcomes beyond simple profit We encourage a broadening of negotiation outcomes to include such factors as willingness to engage in future negotiations with a counterpart, perceptions of competitive and cooperative behavior, and whether a deal or an impasse is reached Negotiation scholars also recognize that reputations influence subsequent interactions (e.g., O'Connor & Arnold, 2001) Research is therefore also wananted on the degree to which the types of goals a negotiator adopts relate to how a negotiator is perceived by his or her counterparts One obvious concern associated with the setting of ambitious performance goals in negotiation is that this may exacerbate the mythical fixed pie bias In other words, the natural tendency to approach a negotiation as a situation in which you achieve your Goals and Negotiation 409 objectives by frustrating your counterpart from achieving theirs may be heightened when negotiators are instructed to attain specific and ambitious outcomes in terms of value claimed In the context of distributive bargaining, where a future relationship with one's counterpart is not desired, such an effect may well have functional consequences for performance In contrast, in a situation that has integrative potential and involves interaction with those whom we desire to interact productively in the future, such an effect may facilitate the souring of relationships and the capturing of a large piece of a very small value pie One way to potentially mitigate this effect in the context of integrative bargaining with esteemed counterparts is to ensure that specific and difficult goals are set with respect to multiple determinants of negotiation effectiveness For example, instead of simply setting a goal with respect to price in a negotiation, negotiators should also set specific and difficult goals with respect to value created, their counterpart's satisfaction with the- final result, and the impact of the process of negotiation on the bargaining relationship If a truly successful negotiation requires the attainment of all these objectives simultaneously, then to be effective, goal setting should reflect this reality At the same time, however, a commitment to too many goals may increase the difficulty of reaching an agreement Requiring that a deal be reached only when it achieves goals on price, value creation, and counterpart satisfaction may prove difficult-if not impossible-and increase the likelihood that negotiators walk away from an agreement that would be better than their alternatives To reduce the potential difficulty of reaching agreement with multiple goals, it may make more sense according to regulatory focus theory for the negotiators to adopt a promotion focus, and thus to perceive the negotiation as an opportunity to search for ways to reach an agreement and gain value Evidence that negotiators both claim and create more value with a promotion relative to a prevention focus suggests that a promotion focus may be most effective in assisting negotiators to achieve agreement that benefit themselves and others Framing the failure to achieve the goal as a loss may be quite aversive and provoke risky behavior, but this interpretation is also more characteristic of a negotiator with a prevention rather than a promotion focus Individuals with a promotion focus are more likely to interpret failure to reach a goal as a non-gain versus a loss Another topic for future research might be the extent to which risk seeking in the domain of losses and loss aversion exacerbate the tendency to use unethical or illegal tactics in negotiation If desperate situations require desperate measures, then such behaviors during negotiation may well be the product primarily of situational forces rather than individual determinants Whether the tendency to display questionable ethics and use dubious tactics is a product of overly ambitious goal setting in negotiation and the potential resulting perception of having to accept certain losses unless drastic steps are taken is a question worth exploring The advice for negotiators that flows from prospect theory is not that goal setting should be avoided in advance of an important negotiation We continue to subscribe to the view that goal setting is an integral part of successful negotiation planning and preparation Moreover, it is relatively easy to set goals for oneself or for others in negotiation The overarching goals of an important and complex negotiation might be best described briefly as follows: create a large amount of mutual benefit; claim or capture a great deal of this value that you have helped to create; ensure that your counterpart also believes he 410 K Tasa, G Whyte, and G.] Leonardelli or she has won or done well; and finally, all of this in such a way that your relationship with your counterpart has been improved as a result Where things get difficult is in providing negotiation-specific content to these goals For example, it is of no use in negotiation to set a goal that cannot possibly be attained Whether a goal in negotiation is attainable depends on whether there is an overlap in terms of acceptability between oneself and one's counterpart What is minimally acceptable to one's counterpart is frequently unknown in advance of meeting with him or her, and may still be uncertain even after Therefore, to mitigate the risks of setting goals where they cannot possibly be reached, and of producing a result such as an impasse that would be worse than if no goals were set, perhaps the setting of specific and ambitious goals should await the development of an understanding of one's counterpart's interests, and priorities, and alternatives Only then will one be in a position as a negotiator to set goals that are both specific and difficult, as opposed to specific and modest or specific and outrageous Another suggestion that flows from our discussion of setting goals in negotiation is to this in such a way that allows for and legitimizes recalibration in response to new information, in much the same way that goal theory suggests failure to achieve goals will lead eventually to a change downward depending on self-efficacy and commitment (Locke & Latham, 1990) The economically rational benchmark with which to evaluate the outcomes of negotiation, after all, is not the goals that one sets prior to negotiating Rather, it is the consequences of no agreement In some respects, the entire point of negotiating is to better than you would without negotiating If so, then how much better did you do? Anything in excess of this, commonly referred to in the negotiation literature as one's best alternative to a negotiated agreement (BATNA), or by economists as one's opportunity cost, is in essence what one has gained as a result of negotiation Setting goals in negotiation may thus be entirely functional for performance, but such goals should not be used to evaluate performance The quality of performance in negotiation is best determined in relation to what has been gained relative to the consequences of no agreement, not relative to some goal that mayor may not have been arbitrarily set and which one does not attain in any case in the event of no agreement When goals, both learning and outcome, are used to motivate performance in negotiation, but not to evaluate it, we believe that the main benefits of goal setting in negotiation are most likely to be realized and the liabilities minimized Conclusion Our review points to the inescapable conclusion that goals are potentially highly influential in negotiation Whether goals have positive or negative effects on negotiator behavior and outcomes, in turn, depends on the type of negotiation, the type of goal, and how goals are formulated and perceived Therefore, we believe the evidence extant supports the advice that determining one's goals is an important first step in the process of effectively preparing for a negotiation (e.g., Lewicki et al., 2011) Our review, however, also highlights areas where this advice needs to be better nuanced, such as when new information arises in the process of negotiating or when the current situation is framed with respect to an unrealistic reference point Additional research is clearly Goals and Negotiation 411 warranted if we hope to provide further constructive advice to negotiators about how to set goals while struggling to navigate their way through uncertain and unpredictable negotiations References Appelt, K C, & Higgins, E T (2010) My way: How strategic preferences vary by 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