Power Dynamics Make the World Spin ’Round

Most everything is a negotiation—ranging from an interpersonal exchange of any kind to a formal negotiation. But while power differences have a significant impact on the process of negotiations and their outcomes, little is understood about the exact role power plays. “Anyone who has ever been in a negotiation is profoundly aware of power differences,” says Robin Pinkley, SMU Cox strategy professor and co-author of the seminal research paper “Power Dynamics in Negotiation.” In this groundbreaking research, Pinkley and co-authors Peter Kim and Alison Fragale develop a dynamic model that sheds light on what is true power, who has it, and how to use it properly for a desired result.

Creating a Model
In their research, the authors do more than identify simple sources of power in fixed, static relationships, such as those used to propose traditional sources of leadership power.* Instead, they develop a comprehensive theoretical model of power in dynamic, interpersonal exchange relationships, that focuses on the dimensions that underlie sources of power and account for the impact on outcome. None of the theories derived from past research adequately emphasized the interactive nature of interpersonal relationships (as in the context of negotiation), individual power perceptions, or how power relationships can change over time. Because the current work defines power comprehensively and captures its dynamic nature, it is able to explain power differences in negotiation as well as past researchers’ findings.

Potential Power
The model depicts two primary sources (dimensions) of negotiator potential (e.g., real power): 1) the contribution or amount of value that a negotiator can bring to the table (given the opponent’s valuation of this contribution) and 2) the value of a negotiator’s best alternative to the negotiated agreement (BATNA), which determines his or her ability to walk away from the current negotiation. A negotiator’s potential power is based on the contribution or value he or she can offer the opponent, above and beyond the opponent’s BATNA (the value that the opponent can obtain elsewhere). The greater a negotiator’s potential power, the greater the opponent’s dependence on the current deal, and thus the greater the probability of a deal. However, the value each negotiator obtains from the deal (their realized power) is contingent on their relative potential power or relative dependence. Potential power relates to who has power and where it objectively comes from (e.g., the underlying capacity of negotiators to obtain benefits from the current negotiation). Realized power is the extent to which negotiators claim benefits from the interaction and thus, the extent to which they are able to capitalize on their potential power.

Negotiators should identify the importance each party places on the issues under discussion. For example, offering a business owner exclusive access to a proprietary technology with an enforceable contract may do little to improve one’s contribution if this technology fails to serve the business owner’s primary strategic goals. “In my consulting experience, people have very clear misconceptions about what power is,” says Pinkley. “People who have it, don’t even know they have it. Or others impose what they think is power, when it’s not. So, one needs to figure out what power is. Then power can be blocked or changed.” She mentions a recent example when air hostesses tried to use similar negotiating tactics as pilots in recent contract negotiations; they failed to understand the power differences offered by their contributions or BATNAs compared to pilots.

Perceived Power
Although relative potential power should directly translate into negotiator realized power, this is often not the case. Perceived power is the negotiators’ assessments of each other’s potential power and thus, the extent to which they accurately recognize and identify potential (real) sources of power. There are many occasions in which negotiators have incomplete information about the resources their BATNAs and contributions would provide. Negotiators may choose not to reveal their BATNAs or limit knowledge; for example, a job candidate may withhold information regarding the salary offered by another employer. Negotiators may also fail to evaluate their own BATNAs carefully; for example, a job candidate may agree to a salary level with her employer without knowing the salary that could be obtained from a comparable employer. Thus, the more accurately an individual perceives his own and his opponent’s valuations of both parties’ contributions and BATNAs, the stronger the relationship between potential and perceived power.

There is a link between negotiators’ valuations of their BATNAs and contributions (e.g., potential power) and their perceptions of those dimensions (e.g., perceived power). “Negotiators must understand and uncover who has what sources of power before embarking on a negotiation,” Pinkley notes. “Power has an insidious impact on what happens—it greatly impacts outcome and the subsequent well-being of both parties. Negotiators who maintain a biased assessment of the power relationship or fail to recognize the biased perception of their opponents, end up negotiating in the dark … unaware of when and why they keep bouncing their heads against the same wall. The sources of power we’re talking about really translate into outcome.”

Managing Potential Power with Power Use and Change Tactics
The power relationship is rarely fixed and so can typically be altered by manipulating either of the two key sources of power: contributions or BATNAs. Power perceptions drive tactical decisions, which influence negotiators’ dependence and impact the relationship between potential and realized power. As a result, the authors’ model considers a number of power-use and power-change tactics with implications for the loss and accumulation of power. “There are things that can be done to affect or change a power relationship,” Pinkley suggests. “For example, one could have alternative offers behind the scenes while in a job interview. Our work suggests that we need to carefully consider the myriad power-change and power-use strategies that can be used to shift potential power or if not, the perception of potential power.”

Power-use tactics offer negotiators ways to leverage existing power capabilities; whereas power-change tactics are concerned with how negotiators may attempt to alter the power relationship to improve their own side of the table. Negotiators will be more likely to initiate power-change tactics when they perceive their own potential power to be low. In their efforts to alter the power relationship, negotiators may: 
1) Improve the quality of their BATNA (e.g., obtain a job offer from another employer);
2) Decrease the quality of the partner’s BATNA (e.g., dissuade others from applying for the position);
3) Decrease their valuation of the partner’s contribution (e.g., reduce their interest in the employment opportunity); or
4) Increase the partner’s valuation of their own contribution (e.g., take classes to improve their technical skills).

Tactics 1 and 3 seek to reduce a negotiator’s dependence on her partner. These tactics alter the power relationship by reducing the partner’s power. Tactics 2 and 4 seek to increase the partner’s dependence on the negotiator; they alter the power relationship by increasing the focal negotiator’s power. Negotiators’ abilities to improve their BATNAs may be constrained, however, by their organization’s lines of communication, rules, or traditions, for example. Alternatively, their abilities to improve contributions may be constrained by factors such as inadequate talent, opportunity, or time.

Once sufficient power has been achieved in the mind of a negotiator, that negotiator should be inclined to use this power for desired outcomes. Power-change tactics are not restricted to a specific moment in a given negotiation, but can be initiated throughout the course of a relationship. Negotiators may implement power-change tactics in anticipation of an upcoming negotiation. Such tactics may be utilized during the course of the negotiation, when identifying issues of importance to the other party; they can even be used to interrupt the negotiation in mid-course to initiate power-change tactics. Thus, the links among potential power, perceived power, and power-change tactics establish a feedback loop (see Figure 1 in paper) that may be frequently repeated before a given attempt at power use.

In prior research, power-use tactics have been broadly distinguished between conciliatory and hostile power-use tactics and when they are likely to be employed.  Whereas conciliatory tactics refer to positive acts such as communicating a willingness to coordinate or collaborate, hostile tactics refer to negative acts such as communicating an inclination toward competition, intimidation, or resistance. In general, negotiators will employ more hostile and fewer conciliatory power-use tactics when their relative power is unequal than when equal. Second, when total power (e.g., the sum of each negotiator’s potential power) is high, thus increasing negotiators’ stakes in reaching a reasonable solution, they will employ fewer hostile and more conciliatory power-use tactics. Remember that the realization of one’s potential power is not automatic. Certain types of efforts to extract benefits can be more effective than others.

Conciliatory power-use tactics extract benefits in ways that mitigate the harm to a target, requiring efforts to understand the target’s preferences, needs, or wants. Hostile power-use tactics tend to extract benefits in ways that actually exacerbate the target’s harm; hostile power-use tactics do not require attention to addressing the specific needs of the target. Thus, power-use tactics will generally require more effort to implement when they are conciliatory than when hostile. Each negotiating party can initiate such tactics in an offensive or defensive manner to maximize or preserve the benefits sought. The authors go beyond current conceptions of power-use—that of a simple one-way relationship with actors extracting benefits from their targets—to that of a bilateral process.

Realized Power
Type, frequency, and magnitude of a negotiator’s power-use tactics will directly influence that party’s realized power. The extraction of benefits from a relationship often inflicts costs on a target, which might then reduce the target’s valuation of the relationship and lower their dependence. Many power researchers have concluded that extracting benefits from a relationship reduces one’s potential power in future interactions, as embodied by the well-known adage, “to use power is to lose it.”

The extraction of benefits from a negotiation (e.g., realized power) will negatively influence total power (e.g., the sum of each negotiator’s potential power) in the relationship. While conciliatory power-use tactics will shift relative power in favor of the initiator, hostile power-use tactics will shift relative power in favor of the target. Given the loss in total power that power-use tactics entail, negotiators may not necessarily want to realize as much power as they can from a negotiation. This has implications for relationships of longer duration such as joint ventures, versus one-shot agreements.

This model also extends an emerging body of research on the effects of power on those who possess it. This line of research suggests that powerful negotiators will be more likely to behave in disinhibited ways (e.g., by increasing the frequency, magnitude, and hostility of their power-use tactics) as the size of their power advantage grows. Because of greater relative power, they can afford to use hostile power-use tactics without completely eroding their power advantage for the future. Thus, powerful negotiators may possess greater liberty to implement a wider range of power-use tactics and face greater temptations to employ hostile tactics.

In Conclusion
“Our research allows a negotiator to figure out the extent to which there’s a power balance,” Pinkley states. “Our research provides the key that unlocks the mysterious and ambiguous door behind which the power relationship previously resided. Informed negotiators can now use this key to determine who has power, where it comes from, how it can be used or changed, and whether or not it should be allowed to impact outcome.  This key will allow negotiators to proactively, rather than reactively, impact the power relationship before the negotiation. This means that they can change the game before it begins, thereby changing its conclusion.”

In many cases, Pinkley notes, power perceptions correspond more with role than with reality. For example, her supplier-clients almost always believe that their customers have the lion’s share of the power, even when market demands do not support this conclusion.  “When this occurs, the supplier makes unnecessary, unilateral, and often premature concessions because they expect resistance that never comes,” she says. “Suppliers should carefully assess the value of their customers’ alternatives rather than just focus on the mere existence of those alternatives; they might then discover that the customers’ alternatives are phantom (illusionary) rather than real and thus can be vanquished.”

Pinkley believes in changing the game before you play it, if you can. But you must understand it accurately, so that the first step is at an advantaged position rather than disadvantaged. The authors have found a defining model which thus far handles the test of time. Even in the negotiating context of different cultures, the research captures enduring and universal dynamics. As Pinkley states from her experience in negotiations, “Whether we like it or not, power makes the world spin around. And it determines who gets to spin it.”

“Power Dynamics in Negotiation” by Peter Kim, Robin Pinkley, and Alison Fragile was published in Academy of Management Review in 2005.

Summary written by Jennifer Warren.

* See for example French and Raven’s topology of power bases.