Watch CBSN Live

The psychology of negotiation

This illustration shows an artist's view of Swift J1644+57, a black hole 3.9 billion light-years away. Scientists have picked up a signal thought to be the death "scream" of a star falling into the black hole. NASA's Goddard Space Flight Center
(MoneyWatch) The sales business, an author once said, is a Broadway play performed by a psychologist. That psychologist should be you, but sometimes it is the prospect who assumes that role.

That sentiment always reminded me of the famous "big store" con games, like the one depicted in the Oscar-winning best picture from the '70s "The Sting." The film, which stars Paul Newman and Robert Redford (worth a Netflix rental if you haven't seen it), features an elaborate, fake horse-race betting parlor, with dozens of con men and women pretending to work as cashiers, gamblers, and bartenders in the establishment. The fraudsters were like actors in an improv, and the only person who doesn't know they are in a play is the intended mark.

If you want a good read about applied human psychology, I recommend a book called "The Big Con," long out of print but recently reissued. The book is a scholar's study of the con games of yesteryear that "The Sting" is based on. If you don't think the big con is still around, then you missed all those news stories about convicted Ponzi schemer Bernie Madoff bilking people for $18 billion. It was in all the papers.

How to dance with your prospects
How to avoid hiring a "walking lawsuit"
The PowerPoint pitch

Forgive me for mentioning sales and con games in the same article. My point is that such scams represent the highest form of applied psychology, although for evil and not for good.

On a daily basis you carry out psychological negotiations and reach agreements with family, friends, and co-workers. You also use negotiation techniques in resolving everyday disagreements. No doubt you have developed a natural style of negotiating.

What about when making deals with clients? Negotiation is not just the territory of lawyers. In many sales deals, attorneys just enshrine in the contract what was agreed to and add language to mitigate risk. But making the deal came first, and that involved psychology.

Psychology is, of course, just the study of human behavior. Textbooks say that covers a number of areas, including instinct, heredity, environment, and culture. Think back to Psychology 101 and you will recall it also extends to the study of mental processes, including learning and memory, and cognitive functions including intelligence, thought, and language.

You bump into applied psychology everyday. In hiring, companies frequently use psychometric tests, and some attempt to use the results of such tests in managing their human resources training.

But in a salesperson's mind, psychology is a general study of humans (not to be confused with psychiatry, a branch of medicine dealing with mental disorders).

An attorney once wrote that we spend nearly 80 percent of our time at work in formal or informal negotiations with customers, managers, and other employees. Some salespeople are great at negotiating, while others get nervous at the very idea.

Unlike the marks in a big con, prospective customers know they are a psychologist in a play, too. Make no mistake -- they are using psychology on you. They are manipulating you for everything they can get. I call these actors "black-hole" prospects.

Black-hole prospects are like vampires who suck the lifeblood out of the organization. Even if you are lucky enough to land one and turn a profit, there is a price to your human capital that can increase unwanted employee turnover.

Chasing a black-hole prospect, the kind that is always asking extra questions and never turning out to be a sale, is just plain crazy. "How much for 5,000 instead of 500?" "Could you recreate this drawing?" "What if we cross the international date line?" Just one more thing, they say. And the questions go on and on, burning up your time. The dotted line stays woefully unsigned.

When negotiating that next deal, don't get conned by a black-hole prospect.

View CBS News In