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Too Much Information Clouds Negotiators' Judgments

Whether we're negotiating a business deal or talking with a friend about which movie to see, most of us use information we have about the other party to reach agreement. But recent research from the Stanford Graduate School of Business warns that knowing our negotiation partners too well or having the wrong kind of information about them can actually produce less successful negotiating results than having no information.

What today's savvy social media users have dubbed TMI — too much information — can indeed be a pitfall.

"To the extent that people rely on information that's easily available, they may rely on it to the exclusion of doing the hard work necessary to create value in a negotiation," says Margaret Neale, the John G. McCoy–Banc One Corporation Professor of Organizations and Dispute Resolution at the business school, who conducted the research with Scott Wiltermuth, PhD '09, now an assistant professor at USC's Marshall School of Business.

Their experiments looked at the effects of "nondiagnostic information" — useless, irrelevant statements about a negotiation partner, as opposed to information related to the issues being negotiated. Nothing is less useful than generic personality statements that seem to fit everyone to a tee — statements like "This person prefers a certain amount of change and variety and becomes dissatisfied when hemmed in by restrictions and limitations." So that's the kind of useless information the researchers gave one group of participants, supposedly based upon a personality test their partners had taken.

For comparison, a different group only got information directly related to the negotiation, such as which issues were more important to their negotiation partners. Knowing the importance of issues to a person's negotiating partner, Neale says, creates opportunities for a negotiator to enlarge the potential pool of resources available to the parties, rather than simply focusing on who gets what.

When individuals in the two groups were then asked to rate the advantage they gained from the information, both sets of participants reported the same level of advantage, which was higher than that perceived by a control group that hadn't been given any information at all. In other words, Neale explains, "people couldn't tell the difference between diagnostic and nondiagnostic information."

But what was the effect of the useless information on negotiation? To find out, Neale and Wiltermuth asked participants to represent two companies in a merger and negotiate several issues, such as which firm's CEO would head the new company and where that company's headquarters would locate. People who had read the irrelevant, distracting statements, it turned out, were far less accurate in identifying the issues that were least important to their partners — the very issues that offer opportunities to enlarge the size of the pie. Specifically, participants with useless information could identify these issues only 14% of the time and fared worse than even people who had no information at all (who correctly identified the issues 26% of the time).

A follow-up experiment revealed why negotiators with irrelevant information did worse. What the researchers found, Neale says, was not that people weren't exchanging valuable information. "It was that people were not paying attention to this information in front of them." And because they ignored useful information, they created vastly less value than participants who didn't have this useless information. The participants with useless information were also more likely to reach an impasse and fail to reach an agreement at all.

These results, published in the Journal of Applied Psychology, should give pause to anyone who negotiates in the real world, which includes most of us. For one thing, the research suggests why negotiations between friends or other people who know each other well aren't as likely to create value. "Because I think I know you well, I'm not going to be as attuned to the specifics of the negotiation," Neale says. "I'm going to think I know what you care about, but I don't test out those hypotheses."

What's more, the easy availability of information about others — think of LinkedIn profiles, Facebook pages, and Twitter feeds, for example — can lull us into a false sense of confidence even about strangers. That's not to say that such information is always irrelevant, but since we're poor at telling the useful from the useless, looking at social media for insights about our negotiation partners can harm us by shifting our focus from what's truly important in the negotiation. "We feel like we've done our homework," Neale says, "but we don't know the issues."

— Marina Krakovsky