The fine art of negotiating (with liars)

In the age of the megadeal, classes in negotiations have become the most popular electives at many business schools across the country.

Students aspiring to America's executive suites are counseled to view every staff meeting, networking cocktail hour, or chance encounter with a senior manager as a negotiating opportunity.

But too many courses overlook what Robert S. Adler, professor of law and ethics at the University of North Carolina at Chapel Hill's Kenan-Flagler Business School, considers the biggest caveat of the negotiating domain: You are apt to be bargaining with a liar.

"If you read the studies from the field of psychology, you'll see that people lie all the time," Adler said. "We lie to our friends; we lie to our enemies. Sometimes people lie to avoid hurting other people's feelings. Sometimes it's more sinister than that."

While fraudulent companies like Enron Corp. and WorldCom Inc. were found to have lied on financial statements, violating federal securities laws, more garden-variety lying occurs daily when people prepare resumes, file insurance claims, or call in sick to work.

Because lying is so endemic to human behavior, Adler said, instructors in negotiations should teach future business leaders how to spot, trip up, and protect themselves against lies. The lessons apply whether people are discussing mergers, haggling over loans, buying houses or cars, or interviewing job candidates.

Adler outlines his tricks of the trade in an article titled "Mastering The Art of Negotiating with Liars," published in the summer issue of the MIT Sloan Management Review. They include:

Ask negotiating partners upfront to disclose their credentials, credit record, or personal history as a way of establishing trust.

Set ground rules, requesting that bargaining be "good faith" rather than "arm's length." In the former, the parties agree to reveal everything they know to help reach a better deal for both sides. In the latter, they disclose only what's required and can mislead through omission.

Watch for "giveaway" signs of deception, such as sweating, fidgeting, or loss of eye contact, at key points in negotiations.

Frame questions more narrowly or broadly, or make statements that will invite telling responses, if you feel your negotiating partner is providing vague, general, or yes-and-no answers.

For example, Adler suggests asking, "Is there something important you know about this deal that you haven't told me?"

Or, in a real estate transaction where you may suspect a hidden ownership in a property, he recommends saying, "I am going to assume that you do have an undisclosed interest in the property," and then waiting to see whether the other party contradicts the claim.

But even following these techniques to the letter is no guarantee against being swindled, Adler said. "When someone's willing to just blatantly lie, it's extraordinarily difficult to catch them," he conceded.

Adler calls for exhaustive research and preparation before negotiations begin -- such as running the name of the person who will be sitting across the bargaining table through Internet search engines and public information sources such as the Better Business Bureau, the Federal Trade Commission, and consumer protection agencies.

"A well-known way to test veracity is to probe areas where you know the answer," he wrote in the Review. "If the other side responds with a lie, you know that there is an issue of trustworthiness."

Not everyone agrees such hard-nosed tactics are the best approach to business negotiations. Newton executive coach Lauren Mackler said the most effective approach depends on the circumstances. In all cases, she said, personal style and intentions -- yours and your partner's -- are the critical factors to a successful outcome.

Mackler warned against too quickly concluding that your negotiating partner is a liar. "If you're coming into a negotiation assuming people are going to cheat you, that's coming from your own pathology," she said. "I think it's better to go on the presumption that people are running on integrity and honesty unless proven otherwise."

In the post-Enron era, however, Adler believes it's prudent to take precautions -- that includes jotting down notes during talks, putting the other person's claims in writing, and incorporating contingency clauses into agreements.

"Many people will remember President Ronald Reagan's negotiations with Soviet Premier Mikhail Gorbachev in 1987 over the Intermediate Nuclear Forces Treaty," wrote Adler, "where Reagan used a line attributed to Lenin: 'Trust, but verify.' "

Robert Weisman can be reached at weisman@globe.com.