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So many opportunities. So little time. This issue makes investment bankers and business brokers critical to effective M&A, especially in…
Effective negotiation is a critical skill for being a successful dealmaker. But no one said it was easy. Not only do you have to anticipate your counterpartyâs remarks and arguments, you need to convince him that your ideas are the better route. There are a variety of tactics — like using precision or doing one-on-one negotiations — that can boost negotiation prowess in the long run.
Or you could just break bread.
Earlier this year, Lakshmi Balachandra, an Assistant Professor of Entrepreneurship at Babson College, learned that eating during a negotiation process can significantly improve the resulting deal for both parties.
According to her recent HBR article, Balachandra tested the relationship between food and negotiations in a series of experiments. âThe first [experiment] compared negotiations that took place over a meal in restaurants to negotiations in conference rooms, without any food to eat. In the second, negotiations were conducted with or without a meal in a business conference room.â
She continued, âIn the experiments, 132 MBA students negotiated a complex joint venture agreement between two companies. In the simulation, a provisional deal is in place, but a variety of terms must still be considered and agreed upon to maximize profits for their companies. The negotiators must determine how to handle each term of the deal. As is typical in many negotiations, in order to maximize their profits, the negotiators must share information and work together with the other side to learn where the most value can be created.”
The results were clear. Balachandra learned that, âThe students who ate together while negotiating â either at a restaurant or over food brought into a business conference room â created significantly increased profits compared to those who negotiated without dining.â She continued, âThis suggests that eating while deciding important matters offers profitable, measurable benefits through mutually productive discussions.â
However, Balachandra, was careful to avoid the âcorrelation-does-not-imply-causationâ trap. Just because the dining deal makers came out on top does not mean the food was the reason for the success. She dug deeper and âdesigned a third experiment to test if it was in fact the act of eating together and not merely sharing a separate task that led to the better negotiated outcomes.â For her next experiment, she âhad 45 MBA students negotiate the same simulation, but instead of negotiating while eating, half of the groups negotiated while completing a jigsaw puzzle that had nothing to do with the negotiation.”
Again, the results pointed to food. âIn this experiment, I found that the negotiators who shared a common task did not create better negotiation outcomes than those who only negotiated the deal,â she explained.
Eating during negotiations may yield better results because of a combination of social and biological factors. Socially, the âunconscious mimicking behaviors of others leads to increased pro-social behaviors; when individuals eat together they enact the same movements. This unconscious mimicking of each other may induce positive feelings towards both the other party and the matter under discussion,â explained Balachandra.
Since the jigsaw-completing negotiators had mirroring actions, it is likely that the importance of food is tied to certain biological factors. Balachandra explained, âWhen the negotiators in my first two studies ate, they immediately increased their glucose levels. Research has shown that the consumption of glucose enhances complex brain activities, bolstering self-control and regulating prejudice and aggressive behaviors. After all, there are few things worse than negotiating while hungry.