Power Asymmetry and the Principal-Agent Problem
Background: On the left is Rob, the employee. On the right is La
y, his boss.
The full video is on Blackboard, Yuja.
This video simulation was designed to give you insights into the challenges su
ounding difficult conversations, both with people across the table, as well as with people on their own side. The scenario also focuses on negotiating with those who are more senior and who may exhibit nonconstructive behavior. The video is separated into three sections, highlighting separate phases of a difficult conversation or negotiation:
preparation and goal alignment,
e-evaluation of mid-course strategy, and
eview and coaching.
Learning Objectives:
Ability to managing the tension between principals and agents (the “principal-agent problem”).
Ability to handling difficult conversations
Understanding coaching as a managerial responsibility
Understanding the differences between the “Dealmaking Mindset” vs. the “Implementation Mindset”
Skill in dealing with power asymmetries
Ability to Influence without having authority
Understanding the “Fixed Mindset” vs. the “Growth Mindset
Understanding the Advantages of Using Agents to Represent Your Interests
Expertise
Substantive knowledge
Networks and special influence
Emotional detachment
Ratification
Face saving
Understanding the Disadvantages of Using Agents to Represent Your Interests
Incompatible incentive structure
Loss of control
Agreement at any cost
Knowledge of how to Work Effectively with Agents
Shop around
Know your BATNA before meeting with your agent
Communicate your interests to your agent without revealing your reservation price
Capitalize on the agent’s expertise
Tap into your agent’s sources of information
Use agent networks
Discuss ratification
Use your agent to help save face
Use your agent to buffer emotions
Knowledge of Managing Constituent Relationships
A constituent is ostensibly on the “same side” as a principal, but exerts independent influence on the outcome through the principal
Understanding the Three Types of Constituencies
Superiors
Subordinates
The constituents themselves
Managing Challenges for Constituent Relationships
Behind the table ba
iers
Accountability (second table)
Decision-making vigilance
Impression management and face-saving
Prototypical versus peripheral representatives
Conflicts of interest
Know Strategies for Improving Constituent Relationships
Communicate with your constituents
Do not expect homogeneity of constituent views
Educate your constituents on your role and your limitations
Help your constituents to do horizon thinking
Key Terms:
perceived power A negotiator’s assessment of each party’s potential power, which may or may not square with reality
potential power The underlying capacity of the negotiator to obtain benefits from one’s agreement
power The potential a person holds to influence others successfully
Symmetric versus Asymmetric Power
In some negotiation situations, one party has considerately more power as compared to the other partysuch situations are characterized by power asymmetry
power tactics Refers to the behaviors designed to use or change the power relationship
primary status characteristics Indicators of legitimate authority that are relevant to accomplishing a specific task; e.g., rank, title, previous experience, etc.
ealized power The extent to which negotiators have claimed benefits from the interaction
eputation A socially constructed label that provide a representation that organizes a person’s perception of another person
self-fulfilling prophecy A situation that occurs when the beliefs held by a perceiver elicit behavior from a target person in a manner that confirms the perceiver’s expectations
status The relative social position or rank given to people or groups by others
agreement bias When negotiators focus on reaching common ground with the other party and are reluctant to accept differences of interest, even when such acceptance might create options for joint gain
ehind the table ba
ier Refers to how negotiators must sell deals to their own internal constituencies as well as the other party
constituent Represents peripheral player in a negotiation that is on the “same side” as a principle, but exerts independent influence on the outcome through their relationship with the principle
getting to yes bias A psychological bias in which agreement becomes more important than the contents of the agreement
horizon thinking A type of thinking that involves making projections about future outcomes
multiparty negotiation When a group of three or more individuals, each representing his or her own interests, attempts to resolve perceived differences of interest
second table In a group negotiation, the relationship that parties share with their constituents
status quo bias A tendency in decision making and negotiation to prefer cu
ent circumstances over proposed new ones
tunnel vision The tendency for people in group negotiations to underestimate the number of feasible options and alternatives available
Instructions:
1. Before you watch the video read the following chapters in the textbook:
a. Power, Ethics, and Reputation, Chapter 8,
. Multiple Parties, Coalitions, and Teams, Chapter 10.
c. Review the teaching objectives and key terms above.
2. Watch Part I of the video: Preparation and Goal Alignment.
3. Stop the video.
4. Write some notes that take Rob’s perspective and note how you may feel departing this conversation.
5. Watch Part II. Re-evaluation of Mid-course Strategy.
Rob de
iefs the first round of the negotiation with La
y, and explains an unexpected
complication that the client has hired an agent (“procurement consultant”) to be their lead
negotiator.
6. Stop the video.
7. Take notes to record what you think of La
y’s plan. Note how would you advise them to approach this negotiation.
8. Watch Part III. Review and Coaching.
Rob negotiates a creative solution with the client and reports back to La
y.
9. Stop the video.
10. Write notes that analyze the choices that La
y and Rob make in this conversation that could undermine future collaboration.
11. Use your notes to write a report about this situation. Your report should be between 500 and 750 words in length. Your report must demonstrate that you understand the key learning objectives listed above. You must co
ectly use at least 10 of the key terms listed above. Highlight (e.g., italic font, color) these terms in your report when you use them. Upload your report to Blackboard no later than Fe
uary 17.
Revised XXXXXXXXXX All Rights Reserved
Revised XXXXXXXXXX
All Rights Reserved
Power Asymmetry and the Principal
-
Agent Problem
Background:
On the left is
Ro
, th
e employee.
On the right is L
a
y
,
his bo
ss
.
The full video is on Blackboard
, Yuja.
This video simulation was designed to give
you
insights into the challenges su
ounding difficult
c
onversations, both with people across the table, as well as with people on their own side. The scenario
also focuses on negotiating with those who are more s
enior and who may exhibit nonconstructive
ehavior. The video is separated into three sections, highlighting separate phases of a difficult
conversation or negotiation:
preparation and goal alignment,
e
-
evaluation of mid
-
course strategy, and
eview and co
aching.
Learning Objectives:
Ability to m
anaging the tension between principals and agents (the “principal
-
agent problem”).
Ability to h
andling
d
ifficult
c
onversations
Understanding c
oaching as a
m
anagerial
esponsibility
Understanding the
differences between the
“Dealmaking Mindset” vs. the “Implementation Mindset”
Skill in d
ealing with
p
ower
a
symmetries
Ability to
Influenc
e
w
ithout
having a
uthority
Revised XXXXXXXXXXAll Rights Reserved
Power Asymmetry and the Principal-Agent Problem
Background: On the left is Rob, the employee. On the right is La
y, his boss.
The full video is on Blackboard, Yuja.
This video simulation was designed to give you insights into the challenges su
ounding difficult
conversations, both with people across the table, as well as with people on their own side. The scenario
also focuses on negotiating with those who are more senior and who may exhibit nonconstructive
ehavior. The video is separated into three sections, highlighting separate phases of a difficult
conversation or negotiation:
preparation and goal alignment,
e-evaluation of mid-course strategy, and
eview and coaching.
Learning Objectives:
Ability to managing the tension between principals and agents (the “principal-agent problem”).
Ability to handling difficult conversations
Understanding coaching as a managerial responsibility
Understanding the differences between the “Dealmaking Mindset” vs. the “Implementation Mindset”
Skill in dealing with power asymmetries
Ability to Influence without having authority