Jack Donaghy (from TV’s 30Rock show) is a big-time TV exec. struggling to negotiate down his Nanny’s hourly rate.
[You can see the whole clip on YouTube: https://www.youtube.com/watch?v=a7-eoiY4bOo#action=share.]
Despite Jack’s extensive negotiation skills the Nanny successfully uses the knowledge she has about how much Jack values her to prevent her pay being reduced. She has clearly done her homework, and she is clearly prepared to walk away.
Meanwhile Jack makes several errors: creating an unfavourable anchor, letting his emotions get the better of him, and being unprepared with alternatives if his first play doesn’t go down well. It doesn’t.
The Nanny knows that Jack needs someone else to take care of his child whilst he is getting his well-earned sleep. The Nanny knows her value, and so has power in the negotiation.
The Nanny clearly knows how to play hardball. Nanny services are not something you ask a stranger in the street to do for you. Your Nanny is looking after the most precious thing you have in the world. So, the Nanny knows not to negotiate against herself. She asks Jack….“so what do you want to do?” This puts pressure on Jack to come up with a solution. Jack ends up negotiating against himself as a result.
The Nanny, staying silent creates an uncomfortable moment which Jack interprets as an outright rejection – although she never says she rejects his offer, and nor does the Nanny threaten what she might do if a deal can’t be reached. The Nanny says very little and keeps her cool.
Jack hasn’t made any alternative plans. Jack retreats from the negotiation. Scared the Nanny might walk away from the table Jack agrees to the full amount of pay the Nanny has demanded.
Jack also displays some other ‘classic’ mistakes here: First: just before the scene starts the Nanny has made the first, and extreme, offer.
Yukle (1974) found that the more extreme your first offer is (as long as it is in your favour) the more successful you will be in the negotiation. Galinsky & Mussweiler (2001) explored the role of first offers in negotiations. Across three experiments, whether it was the buyer or seller who made the first offer, the person who made the first offer achieved a better outcome. In addition, Galinsky & Mussweiler found that first offers were a strong predictor of final settlement prices.
By signing a check with an amount he didn’t intend to pay before the negotiation had even begun Jack anchors that amount as something he is willing to countenance. The Nanny sees him write and sign the check. This high anchor, which was set by the Nanny to start with, makes it harder for Jack to drive down the price, even after he has thought out a better negotiation strategy.
Second: Jack lets his love for his baby rule the deal. He compares the deal to buying potatoes, but he and the Nanny both know that that's NOT why he's paying her. A good negotiator should stay neutral and keep their emotions in check. Easier said than done, right?
Jack gets frustrated and angry when he realises that he is not making progress in the negotiation. Feeling negative emotions and (worse) showing these to the Nanny also hampers his negotiation options. ‘Negative affect’ – feelings of anger, contempt, disgust, guilt, fear, and nervousness - has been found to hinder individuals in negotiation situations in many ways (Forgas, 1998). In addition, showing your frustration or anger will only work in your favour if the opponent is in a weaker negotiation position. In this case, the Nanny has established that she is in pole position – and Jack knows it.
Finally, even though Jack has had some time to work on his strategy he clearly hasn't thought through all the permutations of what could happen. Jack threatens to walk away from the negotiation table, but the threat is an empty one, and the Nanny knows it. Despite Jack's money and powerful job, SHE has the leverage. And they both know it. Once the Nanny has called his bluff it's all over.
Jack realises half way through the negotiation that (1) he really needs his Nanny and (2) he's going to need to have a relationship with her going forward - so he has to tread very carefully. He must be thinking "maybe this wasn't such a great discussion to have in the first place?" Plus - he obviously hasn’t explored all his alternatives – there must be friend and family who would help out in an emergency?
By not having an alternative strategy worked out beforehand Jack is like putty in the Nanny’s hands.
Jack: 0. Nanny: 1.