Lies, bluffs, and business deals: Which of these does lasting damage?

Professor of Supply Chain Management Craig Carter teamed up with colleagues to investigate how deception impacts business negotiations and people’s willingness to continue working with dishonest counterparts.

Tell the truth: You lie every now and then, don’t you?

Most people do, according to Craig Carter, professor of supply chain management.

He should know. He teamed up with three colleagues to investigate how deception impacts business negotiations and people’s willingness to continue working with dishonest counterparts. As it turns out, the scholars found that some deception can derail an entire relationship, while some earns little more than a shrug. It all depends on whether untruths are perceived to be bluffs or lies.

Pardon me

In conducting their studies, the researchers subscribed to two theories of behavior that explain what happens when we lie. Social cognitive theory operates on the idea that people cultivate moral standards by watching what seems to be the norm and then conforming to it, and these standards we embrace tend to keep us in line. Put another way, humans monitor and self-regulate behavior based on the social standards we’ve picked up along the way. Doing so makes us feel good about ourselves; following the rules lets us avoid self-censure or guilt.

Self-policing happens, but so do temptations. When enticements are strong enough, we will tell ourselves comforting things to justify behavior that takes the low road, such as lying or stealing. That’s called moral disengagement, and it is the second principle that guided this research. Basically, people find a way to pardon their lies and avoid feeling bad about bad behavior.

“Everyone lies at some point,” Carter says. He cites one study in which scholars had students perform short math tests. In some instances, the students were graded; in others, they graded themselves, put their tests in the shredder, and then reported their number of correct answers. Each correct answer earned a student $5.

The average correct score for students who had tests graded by someone else was four. The number of correct answers reported by self-scoring students was six.

“Not everyone lied, but on average, the researchers say most students tried to increase economic gain,” Carter explains. He adds that for those who decided to lie — and almost every one of them did at least a little — they probably rationalized that deceit by telling themselves things like, “Well, I was really close to getting that last problem right,” or “Man, that guy next to me kept tapping his pencil and distracted me. I probably could have gotten six right.”

“They’re minimizing cognitive dissonance by doing that,” Carter explains. Cognitive dissonance is the discomfort people feel when reality doesn’t conform to beliefs. So, for people who think they’re pretty much decent folk, lying about getting all 10 answers correct would likely create too big a guilt load. “If they’d reported 10 correct answers, they’d probably feel really bad about themselves,” Carter says. But, a little lying? That’s easier to excuse.

Drawing the line

Carter defines deception as any transmission of information that intentionally misleads others, so both bluffs and lies fit in that category. But, at what point does a white lie become a black one or a bluff become a lie? When it comes to that distinction, the difference lies in the beholder.

A bluff is palatable to both parties. A lie is unpalatable to both parties.

How did he come to this conclusion? He and his team ran four studies. In the first two, the researchers wanted to define the terms, so they presented study participants with 48 different forms of deception that might occur in a negotiation. During one study, participants were asked to sort the items between the “bluff” or “lie” categories and also to express the degree to which the behavior fit these categories using a 9-point scale. The participants didn’t receive a definition of the terms “bluff” or “lie” because the researchers wanted to uncover their personal viewpoints.

Behaviors presented to participants as bluffs and lies included things like:

• Make a demand that is far greater than what I really hope to settle for.
• Pretend that the order has already been awarded to a competitor and can only be revoked if my counterpart makes concessions right now, although I know the deal has not been signed yet.
• Promise that, according to my forecast, I am going to order a couple of thousand pieces of the supplier’s product, even though I most likely will order only a couple hundred.
• Fudge numbers.
• Make an offer that I know I will retract.
• Pretend that I like the other party personally, although I actually don’t like them at all.

Along with the sorting exercise the research team had another group of participants make best-worst decisions in which they were given a behavior and asked if it more closely resembled a bluff or lie. This selection was done with a simple check mark on the paper under the words, “bluff” or “lie.”

Once the researchers had their distinctions, they had study participants play the role of buyers left to negotiate a price after all other elements of a deal had already been agreed upon. Then, the researchers explored participants’ views of how the negotiation had progressed.

Follow the angst

Remember cognitive dissonance, that uncomfortable feeling that can prompt moral disengagement? The first experiment with would-be buyers revealed that people who bluff don’t experience any more cognitive dissonance than people who are completely honest. In other words, the bluff is palatable. A lie, however, isn’t. It created a much greater degree of cognitive dissonance than bluffing or honesty, so lies were unpalatable even to liars.

The second experiment with the would-be buyers put purchasing agents in a position where they were on the receiving end of either a bluff, a lie, or the truth, and study participants didn’t discover this until the negotiation had gone through some back-and-forth activity. “In terms of the target of a bluff, that target basically was not angry once he or she discovered the bluff,” Carter says. “There was no anger directed toward the bluffer, no more so than with honest communication. There was self-directed anger. In other words, the person said, ‘I should have been savvier. I should have figured this out, and I’m kind of mad at myself for not doing that.’”

Again, the bluff was palatable and, as such, it didn’t impact a person’s willingness to engage in business negotiations with the bluffer again. “There was the same level of willingness to do business in the future with the bluffer as there was with someone who was honest,” Carter says. But, that couldn’t be said for willingness to work with someone who’d lied. Lying was considered unpalatable, and it resulted in a high degree of anger on the part of those who’d been duped. Folks were mad at the liars. Lying also turned out to be a deal breaker and a relationship breaker, as study participants were less willing to work with the liar again.

Clear the air

For managers of buyers and sellers, this research indicates the need for very clear, precise direction to those who conduct negotiations. “If right now the manager says, ‘Don’t lie,’ it’s not sending a clear signal to the commodity managers and others who are negotiating,” Carter says. It might take bluffing completely off the table for the negotiating team, and that may not be in the company’s best interest.

He points to this example: Suppose your buyer is hoping to get an item for $5.25 each, and the seller starts the negotiation saying “The lowest I can go is $4.50.”

“What you don’t want your buyer to do is say, ‘Yippee,’” Carter says. A better response might be, “We appreciate you sharing that. We had a different number in mind. Can you go lower than that?”

That, Carter says, is an example of a bluff, and something managers might want to keep in employees’ toolboxes.

On the other hand, he points out, you can’t negotiate every detail, so strong relationships are vital. “At some point, you may have to go to a supplier and say, ‘Can you give me a hand and expedite an order?’ If you’re on good terms with the supplier, they’re going to help you out. If you’re not, they’re less likely to help when they have other customers who might similarly be requesting favors,” Carter adds.

He advises managers of those who negotiate for the company to clearly define acceptable rules of engagement aimed at ethical dealing and preserving an organization’s reputation. For sellers, the risk is that lies will turn off buyers. For buyers, poor relationships can impact a seller’s willingness to give concessions. There’s much at stake.

“It may warrant revising your policies so that negotiators understand what is allowed, what is acceptable, and what is not acceptable,” Carter says.