The Long Term Costs of a Bad Negotiating Reputation

Faculty who teach negotiation skills at Fisher College of Business at The Ohio State University repeatedly state that one of a negotiator’s most valuable assets is their reputation. If one is known to be honest, trustworthy and likely to keep their word, dealmaking is quick, painless and likely to be mutually beneficial. On the other hand, a negotiator who has a reputation for being erratic, unpredictable, dishonest and difficult to deal with will have a significantly more problematic time finding willing negotiating partners, obtaining deals and handling all of the caveats and constraints placed upon them. [1]

Witness a highly visible national example. Noted columnist and commentator Fareed Zakaria has observed a new negotiating phenomena called the “Trump Two Step.” According to Zakaria [2], it goes something like this:

‘Begin by hurling insults at the other side, some of which have a basis in reality but are mostly wild exaggerations. Threaten extreme consequences. Then meet with the other side, backpedal and triumphantly announce that you have saved the world from a crisis that your rhetoric and actions caused in the first place.’

Using examples of North Korea, the European Union and trade wars with numerous countries, Zakharia points out that for President Trump, there are no costs to this strategy, ‘because his words are weightless.’ Trump is using a tactic described in his book, The Art of the Deal, called ‘truthful hyperbole,’ but then, when confronted, adjusts to a more moderate strategy.

While the strategy may have high payoffs to supporting Trump’s political base, the actual negative consequences are significant for the United States. First, the tactic has produced no significant concessions in any of these deals. Second, by creating a reputation as an unpredictable, erratic and unreliable leader, the U.S is losing credibility with its most important economic and political allies. This former reputation was firmly rooted in a reputation of a partner who is predictable, stable and has a pro-market orientation. Both European and American political and business leaders note that countries are now bypassing the U.S. in forging new economic and political alliances, including the revised European Union trade deal with Japan and the Trans-Pacific Partnership, and also creating a massive decline in foreign direct investment in the U.S. Believing that they can no longer count on the United States for economic or political support, many countries are now excluding the U.S. from deals that Trump claimed he could ‘significantly improve’ through better negotiating.

Almost every negotiating instructor we know at business and law schools across the country would not advocate using ‘creative hyperbole’ as a tactic that is likely to either gain advantageous deals or secure one’s negotiating reputation. We have only a national example to reinforce the harm of this approach.

Photo Credit: The White House

References

[1] Lewicki, R. J., Barry, B., & Saunders, D. M. (2016). Essentials of negotiation.

[2] Fareed Zakaria, ‘Trump’s flip plopping bluster comes at a staggering cost’, Washington Post, July 26, 2018.  https://www.washingtonpost.com/opinions/the-trump-two-step-strikes-again/2018/07/26/16150232-9111-11e8-b769-e3fff17f0689_story.html?utm_term=.4e05b85fbef