Hello and welcome to Research Pod. Thank you for listening and joining us today. In this episode, we will be looking at the work of Leopold Ried from Erasmus University, Stephanie Eckerd from the University of Tennessee, Lutz Kaufmann from WHU - Otto Beisheim School of Management and Craig Carter from Arizona State University.
The research we’re exploring today has been published in both the Journal of Operations Management and Harvard Business Review. It takes an in-depth look at the ethics behind buyer-supplier negotiations and the knock-on effect that dishonesty has to those on the receiving end.
Negotiation is a key component of buyer-supplier interactions. In an ideal world, each side must understand what the other wants and needs, and move towards a reasonable compromise that works for both parties. But the tactics involved often fall into a greyer area, from honesty to bluffing to outright lies.
In today’s environment where a company is judged as much for its moral code as its commercial output, it might seem like integrity is highly prized and indeed, demanded.
However, according to today’s findings, dishonesty isn’t just tolerated – it’s contagious.
Get lied to once and you’re much more likely to do it yourself in a separate negotiation with another company. To avoid this spiral of deceit, there are certain actions that organisations can - and should - take to prevent it from spreading, both internally and beyond.
Let’s take a look at how the authors’ research into buyer-supplier negotiations was conducted.
Ried and colleagues set up two written online experiments involving 350 and 424 professional salespeople with relevant negotiation experience. In both experiments, all participants took the role of sales managers for a cosmetics and home-care supplier. This ensured a relatable ‘product’ for which no prior familiarity was required. They subsequently entered several first-round negotiations over product prices with purchasers from various customer firms. It was established that no prior relationship existed between the buyers and suppliers.
In the first experiment, participants were allocated at random to one of eight conditions. This determined whether they would be treated with lies, bluffs, honesty or as a neutral control, and in how many negotiations they are subjected to the respective behaviour; in three or in five. Within each frequency condition, the behaviour they received remained consistent for each negotiation. For example, those under the condition of a medium-frequency lie were lied to during all three first-round negotiations with different companies.
During the “control” treatments, participants received price offers from purchasing managers without any additional explanation. In the other treatments, participants received a proposed price and were subsequently told that the purchasing manager had provided a justification for it. They were additionally informed if this was true, a bluff, or a lie allowing the researchers to analyse what effect this information had on their subsequent decisions.
For the last negotiation, the participants did not receive a price offer but instead kicked off the negotiation themselves with a written statement. Importantly, this negotiation took place with a new company that was unrelated to the previous negotiations. The authors then analysed the level of dishonesty in the negotiation the participants chose to initiate when they were the ones making the first move with a new counterpart.
This first experiment revealed that 55% of participants who witnessed lies lied when it was their turn to start the negotiations. However, only 16% of participants who had witnessed honesty the whole way through then went on to lie in the final negotiation. Put another way, in a sort of reverse ‘pay it forward’, those on the receiving end of a lie were far more likely to ape the behaviour and lie to a third party themselves, thereby widening the web of deceit. The odds of honest behaviour were nearly 4 times higher if participants were aware they had been treated honestly compared to those who knew they had been lied to. If lies are contagious, honesty can be as well.
The second experiment was then slightly altered by making dishonesty less appealing, in order to deter participants from deceptive behaviour. Yet the contagion effect remained. Over double the number of participants chose dishonesty having witnessed it themselves compared to those participants who had only experienced honest behaviour. Interestingly, the amount of times a participant witnessed dishonesty did not impact their actions: the damage was done. A single experience of being deceived was enough to spark a chain reaction.
It's one thing to work with an ethically dubious buyer or supplier but companies must be careful not to let these ethics spill over into their own environment. As the authors warn, ultimately a business will be impacted by the ways of working from the company it keeps.
Why is it important to monitor dishonest behaviours?
A deceitful workforce is a costly one. Permitting dishonest behaviour can sever the trust in both internal and external relationships making future negotiations challenging. Unethical behaviour inhibits employee satisfaction and reduces communication and collaboration which has a significant impact on internal and external relationships.
At the more severe end of the spectrum, dishonest behaviour can lead to legal repercussions and reputational damages for both employees and companies alike. A short-term win can lead to disastrous long-term loss.
The authors even suggest that the severity of the contagion effect within negotiation, and its potential repercussions, should encourage regulators to factor it into environmental, social, and governance (ESG) laws regarding supply chains.
Conversely, when honesty is championed within an organisation, everybody benefits. Consciously building a more ethical workforce, companies will experience greater employee retention and satisfaction in addition to more sustainable business relationships.
How can companies promote honesty within their culture?
The authors offer some key measures companies can put in place to maintain a healthy and ethical working environment:
Firstly, companies should do everything possible to ensure an honest code of conduct is strongly re-enforced as part of the company brand. Those involved in negotiations could participate in bi-annual ethics training allowing a more in-depth look at how they can practically apply ethical thinking to their role, going beyond the generic, box-ticking ethics crash-courses provided at the start of employment. Team leaders could also remind employees about the company’s core ethical principles in monthly team meetings to ensure these values are consistently upheld.
Companies should also ensure their negotiating team has at least two people. Having a second pair of eyes in the room can act as a pseudo “moral compass”, making the chief negotiator more self-analytical and aware of their own behaviour. This could help keep the negotiator in check and prevent the kind of impulsive actions that can result in lies.
Following a negotiation, teams could jointly review their behaviour to assess whether a code of conduct was violated. Knowing that their ethics were being peer-reviewed, so to speak, may make employees more aware of their own behaviours and subsequently more likely to adhere to the code of conduct. The authors emphasise that the company should create a safe and uninhibited environment which will allow negotiators within the organisation to feel comfortable sharing experiences, asking questions and receiving constructive criticism.
Secondly, the negotiating team should carefully screen the other company’s negotiators. It’s worth noting that some degree of dishonesty can be viewed as part of the negotiating ‘game’. However, it is important to be conscious of extremes. The team should keep a close eye on other parties’ behaviours and compare notes on anyone they consider operating in an unusual or deceitful manner. Indeed, the ability to listen and identify verbal and non-verbal cues is a key element of a successful negotiator.
If substantial doubts arise about a member of the opposing side, you can take a judgement on how best to deal with it. If you believe a negotiator is fundamentally dishonest, you may ask that they are replaced citing the reason for your request. Alternatively, you may simply choose not to do business with that company if you notice a track record of deceitful behaviour.
During negotiations, the team could even employ software that aids the identification of dishonest players. The authors experimented with an automated language program called Linguistic Inquiry and Word Count which analysed the phrasing of the negotiation statements. It uncovered that, on average, honest statements had a higher degree of words typical of analytical thinking such as “know” and “cause”. They also used language denoting greater authenticity such as the use of personal pronouns and present tense verbs. Honest dialogue also featured a lower degree of emotional words such as “fear” and “happiness” when compared to language used for bluffing. Language used for outright lying lay in between the two.
While it’s impossible to banish every form of deception from company negotiations, there’s a lot companies can do to protect themselves from the worst of it. At the very least, they can prevent dishonesty from seeping into their own company’s ethos and behaviours and attempt to break the negative cycle of contagion by promoting ethics and honesty throughout their individual workplace. Honesty can be just as contagious.
That’s all for this episode, thanks for listening. You can find the papers on honesty in buyer-supplier negotiations linked to in the show notes for this episode. Don’t forget to subscribe to ResearchPod to hear more of the latest science news and research.
See you again soon.