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Negotiation – Ray Kerkmez Research Paper

Negotiation

 

 

Critique on the nature of Trust in Negotiations

 

 

by Ray Kerkmez  LLM, MDR

 

 

Abstract

In a cultural setting, trust is important in strengthening the bond of members of the community. This plays a major role in making the members to have a feeling of identity eventually creating solidarity and cooperation in the community. In the business setting, trust is important in the relationship between the service providers and the customers. A culture of trust brings along improved co-operation and lowered transaction costs, therefore opening possibilities of more experiences and actions. [1] However, many people avoid application of trust in certain activities where self-centered interest is their main concern. [2] This is especially evident in a business setting whereby bargaining is applied. In a transaction, trust is a vital component; this is because it involves risk as an element. The outcome of the transaction does not depend only on action of the actor but on the action of several actors. One of the actors must take the risk of trusting the other actors on the outcome, thus transaction is a form of trust relation.

 

Introduction

Trust has been given different definitions by different scholars; it can be defined as the readiness of a person to be exposed to the actions of another person through an agreement, [3] practical expectation of a person that the other person will behave in a way that will benefit him/her, risking harm by another person by believing what the person promises, or it can be defined as the absence of one party lack of control of the other party’s actions. Trust is a vital component in human actions, [4] it is an integrative mechanism that creates and sustains solidarity in social relationships and systems. It is an attribute in relationships found in social groups such as friends, families, companies, organisations, communities or a nation. Trust enables mutual understanding in social and in business settings.

Fukuyama 1995, states that the level of trust in a society determines the well being of a nation and its ability to compete. He develops a theory of trust relating to habits in a culture that affect the amount of exclusiveness in a family. The family exclusiveness influences the openness of a family structure and the type of non-kinship relations in the society. He observes that the non-kin relations allows for extended ability to have trust in voluntary activities. In a society with low-levels of non-kin relations there are low levels of trust in activities especially in the voluntary associations, but where there are high-levels of non-kin relations, such activities easily exist. Fukuyama considers that the ability to have large economic corporations depends on the level of trust in the society, that in society where there is a high level of trust; there are chances of forming large corporations that compete. [5]

Fukuyama argues that in a society where trust prevails, development is far more evident than in societies where trust is lacking. He goes further to illustrate his argument by giving examples about nations like China, Italy, and France. [6] He says that people who live in these nations are known to have very low level of trust; close relations are known to exist among families and not beyond that. This makes it difficult to run businesses on a big scale or to have large institutions such as multinational corporations in these nations. Fukuyama further compares this situation with that which exists in nations where trust is known to prevail at high levels, these are nations which are said to develop at a very high rate for example Japan, USA and Germany. In these nations, multinational corporations perform very well and are the major businesses in these nations. He explains that the reason behind prospering of such big institution in such nations is due to high level of trust among the people who live there, apart from the ability to establish businesses and large corporations, these people also enjoy the benefits of improved living conditions and a stable economy.

Fukuyama could be right but he has been criticised by many scholars for basing his argument on a single point. His argument that trust is fundamental for development is true but arguing that the successful nations are because of trust only could be wrong because there are other components vital for development to be experienced, such as the role of a government.

The consequences of trust are positive to the giver and the receiver. [7] Where trust prevails, constrains in social life are suspended and it also eliminate monitoring and control of activities done thus giving one freedom of action. [8]Generally, trust encourages sociability thus enriching interpersonal ties leading to a wider field of interaction. Trust is an important tool in communication as it encourages togetherness in the parties involved. This is through encouragement of tolerance, by for instance, accepting cultural or political differences to be legitimate, viewing them as no threatening. [9]

 

Building trust

For trust to exist it has to be build over time; in an active, non-routine working environment trust is crucial. In trusting, individuals take risks and believe that their vulnerability will not be taken advantage of. [10] A work environment has to have trust in order to have productivity. This is because in case of a history of poor relationship between the management and between labours, distrust shapes the kind of interaction in the environment. For instance, in cases where there is an enormous downsizing, the workers take company assurances with a lot of doubts and scepticism. [11]

 Trust is thus created in the course of daily experiences in the workplace, between organisational and ethnic groups sub-units; trust depends on sharing a long-standing tradition of equally beneficial connections among the individuals involved. Likewise, for a consumers and business, the trust that exists is always as a result of a long time experience of satisfaction with the products from the business. Although not taken as such, trust relationships get into daily conversations and to a significant extent are built through the conversations. Through this manner, the experience of others gets into the social life and it becomes a norm in the community which may not be having personal experience of the trusted entity.

Generally, trust is a quality which grows out of, and informs, of local interaction experiences. This is can be explained by the fact that in trust, personal experience or personal narratives have weighty value in the establishing of trust. A decision to trust comes up usually after an experience and the information we get from other people who we may trust but not by any rational evaluation of available facts. Trust may be rational especially when it is institutionally developed, however, this does not mean it is a rational system states that trust is taken by majority of customers as a dynamic process. It may deepen or retreat depending on the experience of one of the parties involved. Thus, this presents trust to have a pattern during its development through the experiences of the individuals whether in business or in friendships.

A good example of how trust develops is in a case where a relationship is in the early stages, the level of trust is very low or it might not even exist in the parties involved, this is because neither of the parties is familiar with the other. Mutuality in such a situation is very low and trust is at the risk being abused. As the level of trust is low, as is the investment we have in the relationship, the breach of trust needed to jeopardise the relationship is minimal. For instance, a new customer is less likely to offer return business to a retailer if they receive poor service at the first time but an established customer can offer a returns.

There are some tips that a company can use to build and nurture the trust that their customers has on them. These include; [12]

  • Nurturing the existing trust relationships by ensuring that there is enough awareness of the informal groupings, the communities of practice, and the social networks in the company, where trust is at high levels and taking care not to inadvertently destroy them.
  • Making any information unreservedly available within the business will support the exchange of information through lateral/peer channels. It is also important at this point to take care while cascading official news and programs through the company or disseminating information on a controlled, as-needed basis.
  • Discouraging competition between the employees will also work to ensure that distrust is not generated in the process between the co-workers or any parallel groups in the company this can be done by encouraging team-work.
  • Understanding the boundaries in maintaining mechanisms between these parties will also encourage trust building.
  • When organising a change in the culture of an organisation/business for instance, establishing a new business venture, reorganising or merging, it is essential to first consider the social relationships of the involved parties in order to be in a position of assessing trust and distrust levels that are going to exist.
  • It is also important to create a history that can work against any case of distrust-justifying that might be threatening the organisation. This process might take time to assess the situation of relationship in the organisation but the outcome will of be benefit to the progress of the organisation. [13]

 When a company realises the tips of nurturing the existing trust of customers and even its associates, it even becomes much easier to continue building new relations and developing trust in them. The main reason why corporations should worry about trust is because trust is vital in the external and in the internal practices of the corporation. [14] Where there is distrust, there are high chances of workgroups to deliberately give out fake information for their self interest. Likewise, the recipients of the information may distort it in trying to serve their interest. This poses the business at a great risk and eventually, a lot of time and resources are wasted in supervision of activities that take place. Also a lot of energy is wasted in trying to focus on building justifications for the behaviour of the group. The result is a great reluctance to move into uncharted solution spaces with the other organisation, in contrast where there is trust, there is no exploratory behaviour, no experimentation, no risk taking, or out-of-the-box thinking and development is rapid since there are no set-backs. [15]

(Piotr Sztompka, 1999) details the conceptual foundation of trust and suggests a model that describes the occurrence and fading away of a culture of trust. The model helps in understanding the ubiquity and indispensability of trust in social relations, co-operation and in the growing global interdependency. The process of trust building is described through anticipatory, responsive and evocative trust and relating them to the strength and risks of commitment. The elusive nature of trust makes it one of the most difficult characteristics to maintain. Trust require overlooking personal benefits and concentrating on the benefits that the party involved will get. Lack of trust comes up with uncovered costs such as loss of loyalty in a company by its employees, decreased commitment, and a high turnover of the employees, this definitely results to lack of productivity from the workers. Similarly, lack of trust leads to waste of time since it requires checking up on employees.

Trust is extremely indispensable in any significant long-term relationship, whether it is in a buying, selling, or solving a conflict relation. [16] Similarly, in nations where there is a strong and an efficient judicial system, contracts are essential, for instance, a written contract in China or India for example would be far more difficult to enforce than a contract in the USA for example. [17] So relationship becomes comparatively more important to a deal being implemented in China and India. Trust is important element is the authority of your word and the credibility of your actions. Agreements are difficult in the absence of mutual respect and reliability. [18] Both private and business life is full of examples where the future depends on the quality of relationships. For instance, marriage is a relationship, with lack of trust, respect and faith in our partner, marriage becomes nothing else but an empty agreement. A trusting business relationship is similar.

In spite of the visible benefits of having trust as a component in every human action , be it in social life, in business or in personal life, trust is not considered as a vital component in some activities especially where self interest is of major concern, for instance in negotiation. During negotiation, the trait of trust is easily lost when the approach becomes power based, transactional and competitive. [19] Majority of scholars agree that trust is significant to effective negotiation. However, a more classy understanding of trust is essential to understand how it affects decision making and negotiation in different ways. Negotiation is the process where mandated representatives of groups in a conflict situation meet together in order to resolve their differences and to reach agreement. [20] It is a purposeful process, done by two or more parties, where outcome usually dependents on the power of the relationship between the parties.

Negotiations mainly entail compromising whereby if one of the involved parties wins one of their demands, the other party gives in on the other. Negotiations also take place in management, Community and political groups, workplaces or in Unions where representative often use it in solving conflicts. Thompson (2005) states that: trust is a precondition for any negotiation, and it is indispensable in a negotiation. He further argues that a negotiation that favours both parties enables the negotiators to get the most out of whatever they value, and trust is logically one of the values. However, claim that trust is essential for negotiation is an over-statement, [21] negotiation is on element that poses trust at risk, it has two approaches that make it difficult to consider trust in its process, the approaches include; positional and interest-base where the focus of position of the parties involved is not considered but self interest is valued.

There are circumstances where a negotiator uses reliability and sincerity as the building blocks of trust, for instance in hostage cases. The hostage negotiator cannot play a central or even an aggressive part in to control the situation. The hostage negotiator has to become an ally and agree with the hostage takers, the dynamics of such relationships are very different. This is because the hostage negotiators have to be dealt with in double approaches. Other instances are when business people are faced with unexpected situations on a regular basis, situations that are difficult to identify when drawing up agreements at first. [22] A firm base of trust may be the only way to resolve such issues. When faced with such situations where individuals are to deal with people whom they do not truly trust, individuals with other alternatives will commonly exercise such alternatives. [23]

Generally, trust building takes a lot of time and great risks particularly when starting a new business relationship or new partnership. If the parties involved fail to trust one another, it is important to create a way of minimising vulnerability and this will enable avoiding the defensiveness in value creation. [24] There are several ways to safeguard agreements when trust is lacking especially in businesses. These may include creation of guarantees, forming monitoring regimes, and proceeding incrementally. [25]These are important because there must be a way of assuring security when sharing information with the other party especially when parties involve sharing of some confidential data, value-creating agreements are very crucial.

The result of recent studies by the consulting firm ‘A.T Kearney’ [26] showed that trust in high-level business alliances is of particular significance. Firm correlations exist between profits and trust. This means that consistent sharing of data with some clients not only boost trust, but it will also boost the quality of agreements made and these will most probably result to increased profits. This usually take time to be realised but this definitely pays off. Developing and sustaining trust is a vital basis of a sustainable competitive advantage particularly in the business field. It is also worth noting that losing a trust is very much easier than creating it.

Negotiation literature looks at two approaches, the interest-based bargaining and the positional/competitive bargaining.

 

Sub-components of Trust

Some definitions presents trust as a unitary construct while others present it as a multi-dimensional and distinguish cognitive and affective forms of trust. Cognitive (calculus-based) trust reveals a transactional view of relationships. Its features are the reputation, competence and reliability of the other party and this suggests that the outcome is predictable. [27] Affective or the identification-based trust shows a shared view in relationships. It is related with features such as integrity, empathy and goodwill. [28] It reveals an emotional attachment between the parties involved (McAllister, 1995, 1997). In addition, it is based on the realisation of common values and goals.

Trust is vital in a relationship whereby dependency and vulnerability are the core values. In such a situation, the involved parties must rely on each other to accomplish their goals, each individual risks since there is no guarantee of expectations being met; [29] Sheppard & Sherman, 1998; Whitener, Brodt, Korsgaard, & Werner, 1998). Vulnerability and dependency are features of an interdependent relationship, especially where negotiation is involved. In negotiations, there is need to coordinate actions so that the parties can create value integrate interests and find mutually beneficial solutions.

However, the problem-solving behaviours that enable successful coordination also increase negotiators’ vulnerability to exploitation. [30] Although trust has long been recognised as a pre-requisite for successful cooperative bargaining (Pruitt, 1981), relatively little is known about the causes and consequences of trust in negotiation. First, most of negotiations take place between peoples who don’t know each other well enough or they have no prior knowledge of each other. Nonetheless, individuals who have not met before can report high levels of trust early in a relationship. [31] However, trust can be formed at the first impression, that is, through cognitive cues. Liebrand, B., Jansen, W., Rijken, M., & Suhre, J. (1996) suggests that rapid formation of positive first impression can build trust. This is because an individual with a high initial trust acts in a cooperative manner and this can easily make the other party to build trust. Increased interaction can yield more trust since the persistence positive cycle confirms expectations from the other party.

The negotiating context also shapes initial trust: The situational factors that surround a specific interaction create a temporary state that either enhances or diminishes initial trust (Mayer et al., 1995; Pruitt & Kimmel, 1977; Ross & LaCroix, 1996). Theory suggests that trust is increased when individuals behave consistently, predictably and reliably (Battacharya et al., 1998; Lewicki & Bunker, 1996; Lewicki & Weithoff, 2000; Whitener et al., 1998). Individuals are more likely to trust others when they are perceived as reliable, that is when their behaviour is predictable. Behavioural inconsistency, which provides new behavioural evidence, is more likely to trigger information search leads to individual’s rapidly reassessing initial trust (McKnight et al, 1998). Inconsistency can trigger a negative cycle of trust in which violations of initial expectations trigger information search; this increases the likelihood that individuals find more disconfirming evidence and so trust is violated. [32]

Research in other fields suggests that the relationship between expectancy violations and trust may be more complex. For example, Interpersonal Adaptation Theory (Burgoon, Stern and Dillman, 1995) proposes that such violations may be better than expected (positive) or worse than expected (negative). In negotiation, [33] report that switches from competition to cooperation (positive violation) is viewed more positively than switches from cooperation to competition (negative violation). This implies that the impact of behavioural inconsistency will depend in negotiators’ initial expectations.

 

Conclusion

The nature of trust in negotiations is clearly explained, it is also noted that there are factors which initiate, maintain and interrupt with trust during negotiation. For example the first impression has an impact in the process of trust building; co-operation also has a role in the process of building trust. It is also clear that trust predicts the ability of a negotiator to claim value.

Predictability is important in maintaining trust and positive impressions in negotiations, particularly when negotiations start on a cooperative note.

Under such circumstances, the negotiators can gain from a multiplier effect of the two, since positive impressions, consistency and initial trust, combine to further increase trust and enhance positive first impressions. Negotiators who begin with a more competitive approach can use inconsistency to promote trust and increase liking. Introducing cooperative behaviours into a contentious cycle is known to change the negotiating process. [34]

 


[1] F Fukuyama, (1995). Trust: the social virtues and the creation of prosperity. London. Free Press.

[2] Ibid.

[3] H Garfinkel, (2000). Conception of, and Experiments with, “Trust” as a Condition of Stable Concerted Action. New York: Rowald Press.

[4] P Sztompka, (1999). Trust: A Sociological Theory, Cambridge: Cambridge University Press.

[5] F Fukuyama, (1995). Trust: the social virtues and the creation of prosperity. London. Free Press.

[6] Ibid.

[7] T Fiske, (1993). Controlling others: The impact of power on stereotyping, American Psychologist. New York: NY. John Wiley & Sons, 48, 621-628.

[8] H Garfinkel, (2000). Conception of, and Experiments with, “Trust” as a Condition of Stable Concerted Action. New York: Rowald Press.

[9] Ibid.

[10] T Fiske, (1993). Controlling others: The impact of power on stereotyping, American Psychologist. New York: NY. John Wiley & Sons, 48, 621-628.

[11] Ibid

[12] H McKnight, L Cummings, & L Chervany, (1998). Initial trust formation in new organisational relationships. London. Academy of Management Review, 23, 473-490.

[13] Ibid.

[14] B Marietta, (2003). Dangerous Liaisons: Trust, Distrust, and Information Technology in American Work Organisations. New York: NY. Aspen publishers.

[15] Ibid.

[16] M Deutsch, (2002). Interdependence and psychological orientation. In V.J. Derlega & J. Grzelak (Eds.) Cooperation and Helping Behaviour: Theories and Research. New York: Academic Press.

[17] E Burgoon, A Stern, & L Dillman, (1995). Interpersonal adaptation: Dyadic interaction patterns. Cambridge: Cambridge University Press.

[18] Ibid.

[19] B Beersma, & C De Dreu, (1999). Negotiation processes and outcomes in prosocially and egoistically motivated groups: International Journal of Conflict management. New York: NY. Leiser Review.10, 385-402.

[20] E Burgoon, A Stern, & L Dillman, (1995). Interpersonal adaptation: Dyadic interaction patterns. Cambridge: Cambridge University Press.

[21] G Pruitt, (2001). Negotiation Behaviour. New York: Academic Press, Ltd.

[22] Ibid.

[23] B Beersma, & C. De Dreu, (1999). Negotiation processes and outcomes in prosocially and egoistically motivated groups: International Journal of Conflict management. New York: NY. Leiser Review.10, 385-402.

[24] Ibid.

[25] H McKnight, L Cummings, & L Chervany, (1998). Initial trust formation in new organisational relationships. London. Academy of Management Review, 23, 473-490.

[26] B Marietta, (2003). Dangerous Liaisons: Trust, Distrust, and Information Technology in American Work Organisations. New York: NY. Aspen publishers.

[27] H McKnight, L Cummings, & L Chervany. (1998). Initial trust formation in new organisational relationships. London. Academy of Management Review, 23, 473-490.

[28] J McAllister, (1995). Affect- and cognition-based trust as foundations for interpersonal cooperation in organisations, Academy of Management Journal. London. Academic press, 38, 24-59

[29] Ibid.

[30] Ibid.

[31] H McKnight, L Cummings, & L Chervany, (1998). Initial trust formation in new organisational relationships. London. Academy of Management Review, 23, 473-490.

[32] A Mannix, (1993). The influence of power, distribution norms and task meeting structure on resource allocation in small group negotiation, International Journal of Conflict Management, New York: NY. Palaver publishers, 4, 5-23.

[33] J Hilty, & J Carnevale, (1992). Black-hat/white-hat strategy in bilateral negotiation. Organisational Behaviour and Human Decision Processes. New York: NY. John Wiley & Sons, 55, 444-469.

[34] M Brett, L Shapiro & L Lytle, (1998). Refocusing rights- and power oriented negotiators toward integrative negotiations: Process and outcome effects. London. Academy of Management Journal, 41, 410-424.

 

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