When Negotiations Become Routine

Peter Kesting* and Remigiusz Smolinski**

Abstract: The aim of this paper is to apply the insights of recent research on routine in

the context of repeated negotiations. To demonstrate the link between both concepts, we

introduce an analytical framework, based on which we identify different negotiation situations

in which routine can develop. Following the definition of Fisher and Ury (1999), we

distinguish two dimensions of the negotiation process: a problem solving dimension and a

communication dimension which imply and determine the dimensions of our framework,

namely: the degree of substance standardization in negotiated deals and variability of

negotiation partners respectively. We introduce the concept of a critical skill set and argue

that in repeated negotiations, it can be reduced to the part which is relevant for coping with

the dimension that remains unstable or non-standard throughout repetitions. Moreover, we

demonstrate that our framework is inherently dynamic and we illustrate this with simplified

business examples.

Keywords: negotiation, routine, knowledge, skills, context changes.

JEL-Classification: D79

* Lecturer (Privatdozent) at Leipzig Graduate School of Management, Department for Microeconomics and

Information Systems, Jahnallee 59, 04109 Leipzig, email: kesting@microec.hhl.de, tel. +49 341 9851760 and

guest lecturer at Leon Koźmiński Academy of Entrepreneurship and Management.

** Ph.D. candidate at Leipzig Graduate School of Management, Department for Microeconomics and

Information Systems, Jahnallee 59, 04109 Leipzig, email: remigiusz.smolinski@hhl.de, tel. +49 341 9851656.

1

When Negotiations Become Routine

1. Introduction

It obviously makes an important difference whether we negotiate with someone only once, or

whether we do so a second or repeated time. Various aspects of the repeated negotiations

have already been discussed in the literature. The most essential of them include: negotiation

in relationships (e.g. Sheppard 1995; Sheppard and Tuchinsky 1996; Greenhalgh and

Chapman 1996), establishing trust (e.g. Lewicki and Bunker 1995, 1996; Ross and LaCroix

1996), and development and effects of reputation (e.g. Goates, Barry and Friedman 2003;

Lewicki and Tomlinson 2003; Ferris, Blass, Douglas, Kolodinsky and Treadway 2005).

However, what has not been discussed so far is the development of routine.

A general perception of the routine phenomenon can be traced back to the early days of

economic analysis (e.g. Schumpeter 1928/87; March 1958). Nevertheless, the first systematic

approach to routine was its employment as a core element of the evolutionary theory of

economic change by Nelson and Winter (1982). Since then, routine gained some importance

for the research in organizational learning (Cohen 1991; Zollo and Winter 2002) and strategic

management (Teece, Pisano and Shuen 1997; Eisenhardt and Martin 2000). Conversely, the

findings of the research on routine have not been applied to in negotiation analysis so far.1

The aim of this paper is to connect these two streams of literature and to investigate what

happens when negotiations become routine. We are convinced that routine has an important

impact on negotiations, particularly due to its double-edged meaning in this context. On the

one hand, routine creates capabilities, which improve negotiators’ efficiency, but on the other

hand, however, increasing automation may cause that negotiators fall back to familiar

2

3

patterns, thus overlooking the changes in the negotiation environment and failing to adapt to

them. This is always connected with the risk of becoming ineffective.

In section 3 of this paper we investigate how routine can be acquired in repeated negotiations.

Based on various definitions of negotiation, we distinguish two dimensions of the

negotiations process: a problem solving dimension and a communication dimension. Each

implies and determines a respective dimension of our analytical framework either degree of

substance standardization in negotiated agreements or variability of agreement partners.

Section 4 discusses how routine can be applied in repeated negotiations and presents reasons

for and consequences of such applications. We extend our framework by incorporating an

additional element of negotiation skills and introducing the concept of critical skill set. In

section 5 we discuss the dynamics of our framework together with their causes and outcomes.

Based on these findings, we also trace the development of repeated negotiations within

companies, point out the situations in which the movement within our framework can and

should be reversed, and explain the reasons for this phenomenon. To begin with, section 2

briefly introduces the concept of routine and the analysis this paper is based on.

2. Routine

The terminological setting of the routine phenomenon is still a matter of controversial

discussions. For different reasons,2 we follow the approach of defining routine as a person’s

ability to substitute deliberate planning and decision making with replication. By replication

we mean the application of former solutions to current problems. These solutions substitute

planning when they determine the execution of the respective act (which is also the very

meaning of planning and decision making).3 By substitution we do not mean instant and

complete replacement, but rather the gradual exchanging of parts or aspects of the act. By

4

ability, we do not mean the mere capacity to replicate the act in any manner and irrespective

of its results, but instead replication in a well-founded manner. The less planning necessary

to meet our aspirations, the greater our ability to replicate the act. Likewise, the better the

result we can achieve without planning, the greater our ability to replicate the act. Against

this background, repetition is a crucial element of routine in two different respects.

First, in research on routine it is generally assumed—and supported by empirical

investigations to some extent—that our ability to replicate an act is acquired via repetition.

This implies that with repetitions we tend to develop routine (Becker 2001; Pentland 2003,

Kesting 2005). Finally, our ability to replicate an act – our routine – always consists of our

familiarity with this very act, or, in other words, our ability to replicate an act is based on the

specific explicit and implicit knowledge of ‘how to do it.’ It consists of the knowledge we

acquire in the result of deliberation and action planning, on the one hand, and on the other

hand, of the experience we make during the realization of our plans.4 This relates routine

closely to the phenomenon of ‘learning by doing’ (Arrow 1962).

Second, people apply routine to repeated acts. As a substitute to planning, routine enables

replication and adaptation of previously identified satisfactory solutions to a current problem.

As a result, it is possible to substitute deliberation and action planning by routine; hence,

routine has also been characterized as ‘capability’ (Winter 2003). Additionally, it is also

often assumed that with increasing repetitions, acts not only become increasingly ‘routine

controlled,’ but also increasingly automated5 and sub-conscious or ‘patterned’ (Cohen et al.

1996; Dosi, Teece and Winter 1992; Becker 2001). It is important to note that such an

application of routine to control acts only makes sense, if agents’ rationality is bounded

(Conlisk 1996). The main advantage of routine control is the savings in scarce computing

capabilities; to the extent that we apply former solutions, we do not have to plan current

5

problems any more. Yet, this saving has a price. To the extent we apply a former solution,

we do not adapt solutions to the current context. As a consequence, routine acts are always

connected with a danger of becoming ineffective.

The repetitive character of acts has different degrees, depending on the similarity of the

problem and stability of the context. In some sense, even the procedure of decision making

and action taking itself is repetitive – independent of its substance. However, the more

similar the problem and the more stable the context, the more specific knowledge we can

acquire about an act and the more this knowledge fits to repetitions. If, for instance, Teddy

has constructed the same type of wardrobe a hundred times, he has also acquired a great deal

of the specific knowledge of how to build this wardrobe and he can use this specific

knowledge most effectively by constructing this wardrobe again. But this specific knowledge

helps Teddy much less when it comes to building a house. Bearing this in mind, we are using

repetition in the sense of similar repetition.

Now that we have explored the notion of routine, let us now move on to explain how our

approach to routine relates to negotiations.

3. Acquiring routine in negotiations

The literature is abundant in various definitions of negotiation. Gulliver (1979), for example,

defines it as an information exchange process established to reach a certain outcome. In

Getting to Yes, Fisher and Ury define negotiations as ‘back and forth communication designed

to reach an agreement’ (1999, p. xi). A common characteristic with these and many other

definitions (e.g. Cross 1977; Zartman and Berman 1982; Lewicki 1992) is that all of them

implicitly distinguish two dimensions when describing each negotiation:

6

• The first dimension is a problem solving dimension (‘to reach an agreement’).6 In

game theory, negotiations are modeled as games in which the players try to select a

strategy that maximizes their individual utility by choosing the most appropriate

element out of a set of all feasible strategies. This decision is strategic, since the

payoff of each player depends on the strategies pursued by the other players, and often

cooperative, since to maximize their individual utility the players may want to

coordinate the selection of their strategies. Accordingly, the problem solving

dimension in negotiation is reflected in avoiding inefficiencies (Raiffa 1982, p. 148),

identifying win-win situations (Fisher and Ury 1999, p. 58), creating value (Lax and

Sebenius 1986; Mnookin, Peppet and Tulumello, 2000) and so on. This problem

solving aspect is closely connected with the substance of negotiation.

• The second dimension is a communication dimension (‘back and forth

communication’). Communication, both verbal and nonverbal, is a critical element of

each negotiation (Putnam and Poole 1987). It allows for exchanging offers and

counteroffers (Tutzauer 1992), coordinating decisions (Jönsson 2002, p. 270) and

conveying information about alternatives and outcomes (Lewicki 2006, pp. 166-167).

Negotiations usually have a multitude of possible solutions. The selection of a

mutually acceptable final solution is conducted through the communication process

between the negotiating partners. As such, the negotiating partners determine this

communication dimension.

Problem solving and communication fundamentally underlie all negotiation processes. As

such the inherent presence of both of these dimensions in each negotiation is precisely what

motivates the recommendation of Fisher and Ury to ‘separate the people from the problem’

(1999, p. 17).

7

Whenever a negotiation is repeated, the concepts of routine and negotiation meet. However,

‘repeating’ a negotiation can mean different things. In the broadest sense, one can say that

repeating a negotiation means conducting any second negotiation, independent of the context

in which the negotiations take place, i.e. independent of its substance and partners. However,

as indicated above, similarity between repetitions is a prerequisite for routine acquisition.

The insights we acquire about one negotiation partner do not necessary hold true for a

different negotiation partner. On the contrary, different negotiators usually tend to act and

react rather differently. Moreover, feasible options and optimal solutions to one problem

usually cease to be optimal or even feasible in a different problem setting. Nevertheless,

unspecific repetition is an important way of building and improving negotiation skills. We

will address this point in the following section.

Negotiation repetitions become more similar to each other as more of their elements remain

stable in the course of repetition. With respect to the basic structure of negotiations, these

elements can be grouped in the two above aspects: substance and partners.

If the substance of the negotiation is standardized and does not vary substantially through

repetition, negotiators have an opportunity to improve their specific knowledge about this

very substance in the course of repetition:

• As a result of the initial planning, negotiators have already identified and

characterized feasible alternatives and made a decision. With repetitions, their

familiarity with the problem setting increases.

• With repetitions, negotiators increasingly observe how different alternatives look like

and what results they lead to (at the beginning, they were only able to conclude).

They even have the opportunity to try out not only one, but also many different

feasible alternatives in the course of repetition.

If the negotiation partner does not change, negotiators have the opportunity to improve their

specific knowledge about this very partner in the course of repetition:

• They learn how the partner acts and reacts in different situations.

• They learn about negotiation strategies and techniques the partner uses in different

situations and how to properly address these.

This specific knowledge about the substance and partners is the essence of the routine that can

develop in negotiations. It is finally this knowledge that enables negotiators to replicate parts

of negotiations or even complete negotiations.

As a result, the development of routine can be summarized in a matrix (Figure 1) which

categorizes repeated negotiations using the two above mentioned dimensions: degree of

substance standardization in negotiated agreements and variability of agreement partners. 7

Sta

ble

Routine with respect to partners and substance

Routine with respect to substance

Routine with respect to partners

No routine

New

or

Var

ying

Standardized New or Varying

Substance

Par

tner

s

Figure 1 – Routine and negotiation framework

8

9

Negotiations in which varying partners attempt to reach agreements each time over different

issues we described as a no routine case. Since there is little learning connected with

repetitions, no specific knowledge about negotiation partners or negotiation’s substance can

be acquired. This situation is not very common in business. The initial operations of start-up

companies might reassemble it. In some sense, also consulting companies come close to it;

however, consulting companies repeatedly work in specific fields like restructuring or

outsourcing building long term relationships with partners.

On the opposing end, we have repeated negotiations in which a constant pool of partners

negotiates over very similar type of agreements. In this case the interactions remain very

much alike, which suggests that the repetitions may lead to routine development. In business,

this case is represented by a well established business relationship between a producer in

mature industry and his suppliers, delivering standardized raw material.

The next case that we will look at is the situation in which negotiation interactions over

varying issues are repeatedly carried out between the same parties. Such situations are

relatively common in business practice. Once a business relationship is established, very

often it comes under management of designated employees acting as contact partners for each

other. In further stages, existing business relationships can be modified or extended to

include new products and/or services resulting in a new negotiation between the same parties.

This may require the renegotiation of the existing contracts or even signing new ones.

The fourth situation from the matrix takes place when the substance of the negotiation

interactions remains the same but each time involves different partners. If a particular

employee is assigned a responsibility to manage the sales of a given standardized product or

service, this person is facing exactly this situation.

This section described the knowledge aspect of routine, which builds, to a great extent, on

10

learning by doing. It explains how we develop routine. In the next section, we will describe

how routine can be applied to substitute for planning.

4. Applying routine in negotiations

Let us start with the no routine case in which no specific knowledge, applicable to the current

negotiation, has been acquired in the past. Since both, partner and substance are new, the

current negotiation is performed for the first time. As we can not build on previously

acquired specific knowledge, we have to solve the problem of how to negotiate in this

situation. In this sense, negotiation becomes a result of deliberate planning which is precisely

the traditional approach to negotiations. How to proceed in this case? According to the

traditional approach, success in negotiation depends on a set of various skills. Following the

general structure of negotiations introduced in the previous section, these skills, again, can be

grouped into two different classes.

The first class comprises creativity and analytical skills. Proficiency in these skills is a

condition for good performance on the problem solving dimension of negotiation. Although

these have not been explicitly investigated by decision theory, they can be easily derived from

the structure of decision making. They include in particular:

• The ability to determine interests of all parties. This can become quite difficult,

especially when the parties consist of individuals with heterogeneous interests (v.

Wright 1984).

• The ability to identify and characterize feasible alternatives of all parties, which

particularly refers to the capability to acquire and process information (Simon 1955

and 1956).

11

• The ability to determine coherences, and to assess probabilities and the consequences

of possible decisions for different possible contexts (Jeffrey 1983).

• The ability to reduce or deal with complexity (Raiffa 1982 and 2002).

The second class includes negotiation and communication skills. Proficiency in these skills is

a condition for good performance on the communication dimension and therefore they have

been extensively discussed in recent negotiation literature, in particular:

• The ability to identify and pursue an appropriate negotiating strategy (Pruitt 2001)

• The ability to perform and react to different negotiation techniques or so-called

‘negotiation gambits’ (Dawson 2003).

• The ability to manage, recognize and understand nonverbal communication (Burgoon,

Buller and Woodall 1996; Wheeler 2004).

• The ability to develop relationships and build trust (Thompson 2005)

It is noteworthy that these skills are – at least partly – based on individual experience, which,

again, is an outcome of ‘repetition.’ But on the contrary to the development of routine, this

‘repetition’ is necessarily unspecific. The more diverse a negotiator’s experience is, the more

sophisticated his skills become. The meaning of this experience is not to become familiar

with one particular, but rather with the whole range of possible negotiation partners and/or

negotiation’s substance.8

The situations changes when a negotiation is repeated specifically, i.e. when certain aspects of

former negotiations repeat unchanged in the current negotiation. In this case, it is possible to

apply the specific knowledge that has been acquired about these unchanged aspects in the

former negotiations. For instance, if certain details of a previous deal, such as payment and

12

delivery conditions, have already been satisfactorily settled with the negotiation partner, it is

possible simply to apply this settlement in the current negotiation.

In this context, applying routine means nothing more than using specific knowledge about

former solutions to solve current problems. There are two main reasons why it is rational to

do so.

The first reason is to improve the efficiency of the result. In the course of repetition,

negotiators learn about the consequences of their actions and learn to avoid mistakes. It is

rational to utilize this knowledge in the course of repetition. This is the ‘learning by doing’

aspect of routine.

The second reason, however, is that applying routine helps us save scarce computing

capacities. Applying the solution to a former problem means that we do not have to go

through the whole planning process again to solve the current problem. In this way, routine

has the capability to substitute deliberate planning.9 Against this background, routine, indeed,

can be understood as a very effective strategy to deal with our given bounds of rationality.

This is the bounded rationality aspect of routine.

Consequently applied, routine can result in the development of best practice. In general, best

practice is a comprehensive prefixed answer to a certain problem setting. In our case, it is a

‘program’ to act in a specific negotiation situation, which does not necessarily lead to the

optimal solution, but to the solution that, at least, meets our aspirations (Feldman 2000;

Kesting 2005). Best practice contains all accumulated deliberations that have been conducted

and experiences that have been made in the course of repetition. Therefore, it is possible,

although not a result of current planning activity, best practice can be highly efficient - even

higher than the initial planning when we take an action for the first time.

13

Best practice provides a sensible solution to decision problems in cases where we expect that

further planning (which produces opportunity costs, since the restricted computing

capabilities could be used elsewhere) would not pay off. In this situation, best practice has

the potential to reduce our planning effort to a minimum.

The development and implementation of best practice guidelines is of fundamental

importance for each organization willing to benefit from routine. It becomes especially

important during the process of designing and/or restructuring their negotiation systems. For

instance, in 2002 Motorola Inc. decided to implement a new procurement system – the

Motorola Internet Negotiation Tool (MINT). Between 2002 and 2005 the company has

negotiated over $16 billion online, saving over $600 million.10 The key success factors

mentioned by Motorola managers were the resources and time devoted to repeated training of

the purchasing staff and suppliers prior to as well as after the rollout. In other words,

Motorola made sure that the best practice guidelines were established and conveyed to those

who needed to master them.

However, the routine way of dealing with the given bounds of rationality also has its

downside. Routine controlled acts in general and best practice in particular are usually not

fully adapted to context changes in the course of repetition for two reasons:

• The effect of saving computing capacities by routine control results from the fact that

once established solutions are not questioned anymore. This systematically excludes

any comprehensive proof of whether the current repetition really fits in the current

context.11

• It is generally assumed in routine research that highly routine controlled best practice

has the tendency to become automated (or ‘patterned’) and subconscious (Nelson and

Winter 1982; Zollo and Winter 2002; Kesting 2005). This not only shifts the attention

further away from best practice but furthermore, it makes ones established best

practice inflexible and resistant to change.

The consequence of both is that best practice can turn out to be insufficiently adapted to

context changes and, hence, always carries the risk of becoming ineffective. This is the case

when routine becomes a trap.

Let us apply the outcome of our analysis to the framework introduced in the previous section.

The resulting matrix illustrates critical skills sets in repeated negotiations.

Best practice with respect to partners and substance

New

or

Var

ying

S

tabl

e

Standardized New or Varying

Substance

Par

tner

s

Communication and negotiation skills

+ creativity and analytical skills

Communication and negotiation skills

+ best practice with respect to

substance

Best practice with respect to partners

+ creativity and analytical skills

Figure 2 – Critical knowledge sets in repeated negotiations

14

We will first have a look at the no routine case in the northwestern cell of the matrix. This is

the situation professional negotiators often face. They are usually equipped with a full set of

skills that allows them to adapt smoothly to encountered situations: excellent communication

and negotiation skills – necessary to cope with the issue of changing partners coupled with

creativity and analytical skills helping them discover mutually acceptable solutions while

15

dealing with varying issues. In spite of the fact that the arsenal of their negotiation tools

grows larger during each negotiation process, professional negotiators cannot develop and

apply any efficiency increasing best practice. In business organizations, negotiations in no

routine case call for the involvement of highly skilled employees who would be able to cope

with high variability on both matrix dimensions. Accordingly, scarce and costly high-end

management capacities are required in this case.12

The set of critical skills reduces when one of the matrix dimensions, either the substance or

the partners, ceases to vary and becomes fixed or standardized. Let us first consider the case

of repeated negotiation interactions with the same partners over various issues, represented by

the southwestern cell of the matrix. Once a business relationship with a given partner is

established with the intention of sustaining and developing it in the long term, the person

assigned to manage the relationship faces the prospects of negotiating always with the same

counterparts representing the interests of the partner. As described in the previous sections, as

the interactions repeat, the aforementioned person develops a sort of a routine with respect to

the negotiation partner allowing him to identify the most effective negotiation strategies and

techniques in dealing with this partner. Since the same is true for the negotiation partner as

well, the whole process of communication can become routinized to some extent. In this

case, the set of critical skills that the involved persons should possess can be reduced to

creativity and analytical skills necessary to reach an agreement on various issues. Since the

set of partners remains stable, we argue that interpersonal and communication skills – though

always helpful – are not critical for the efficiency of this person in the given setting. The

partnership of Wal-Mart and Procter&Gamble is a very good example of such situation. In

the 1980s, both companies realized the importance of sustaining good long term relationship

with each other and introduced joint teams working in the area of supply chain management.

This operation allowed both companies to routinize communication flows and concentrate on

16

solving joint problems.

Analogically, similar analysis can be conducted when repeated negotiation take place between

varying partners but concerning standardized issues. The northeastern cell of the matrix

illustrates this situation. Very often in such cases, standard form agreements or even contracts

of adhesion exist and only minor modifications reflecting specific partner needs are allowed.

Precisely due to this fact, creativity and analytical skills can be safely excluded from the set of

critical skills that a person confronted with this set up should possess. Much more important

are the interpersonal and communication skills necessary to establish trust and persuade the

other side that the proposed deal is highly attractive, despite the low level of possible

customization. To meet this demand, such a negotiation is best performed by trained

specialists, possessing exactly these skills. The sales operations of car dealers are excellent

examples of such situations. Although some degree of customization is available, the sales

objects (cars usually from a certain manufacturer) are generally relatively standardized and so

is the substance of the negotiations. However, for car dealers the set of negotiation partners

usually varies greatly. In terms of the skills, already a few visits to dealerships assure us that

the sales personnel there possesses excellent communication and negotiation skills which are

not always matched with great creativity and analytical skills.

If the substance is standardized and the set of partners stable then we are dealing with the

simplest situation frequently encountered in business practice. This situation allows for

developing routine corresponding to both dimensions analyzed in this article: substance and

partners. Routine can be formalized in a form of guidelines describing the best practice in

reaching an agreement with each partner from a given set with respect to standardized

substance. Once best practice guidelines are formulated all there is needed to maximize the

efficiency is their strict execution. In this particular case, routine allows us to reduce the

17

complexity of repeated negotiations to simple sets of procedures that can be followed even by

relatively unskilled persons. Hence, comparatively this case demands the less costly

resources within a company. Business relationships between media companies such as TV

and radio broadcasters, newspapers and magazine publisher and media agencies reselling their

advertising products reassemble this case. The sets of negotiation partners for both sides are

relatively small and usually very stable and the negotiation’s substance highly standardized

e.g. advertising time or space. Relationship management is for both parties a purely

administrative job carried out based on best practice rules established in the past. In this case,

the entire negotiation effort can be reduced to a minimum, consisting only of brief agreement

adjustments to recent changes (e.g. in schedule).

5. Model Dynamics and Its Selected Implication

The position of a given company within the matrix usually is not stable, but can change over

time. This inherent dynamics is caused by two opposing forces: (i) the development of

routine on the one hand and (ii) the reaction to context changes on the other hand.

(i) Routine builds up with repetitions and therefore requires time to develop. At any given

company, the first repetitions of a negotiation process always reassemble the situation

depicted in the northwestern cell of the matrix that we called no routine case. At some point

in time, both the substance as well as the partners are new and even in case of experienced

negotiators application of the routine, built up through previous negotiations in different

settings, can lead to misunderstandings and prove to be ineffective. This is always the stage

in which experienced negotiators with a complete set of skills are required.

However, many activities in business life are naturally stable which implies repetitive

18

negotiations concerning the same substance and/or the same partner, e.g. products

manufactured in more or less standardized series, or established long term relationships with

suppliers, customers, partners, or even the government. Moreover, the literature and often

also consulting companies repeatedly point out the necessity to look for opportunities for

process standardization – although mostly driven by the aim to exploit learning curve effects

and not taking into account the development of routine.13

With respect to previously introduced negotiation dimensions, the first approach to

standardize the processes is establishing stable relationships with an optimal number of

business partners. After the optimal set of the most suitable business partners is selected and

assuming that it remains stable over a longer period, and thus allowing repetitions of the

negotiation process, the routine building process can start. Ford Motor Company has recently

announced the plan to offer fewer key suppliers long-term contracts and to work with these

suppliers co-operatively on design and cost reductions (McCracken 2005). The southward

movement from the initially occupied northwestern cell of our matrix can illustrate this

process. Very often, if the overall number of partners is relatively small and stable, the task

of managing relationships with a certain partner or a group of partners is assigned to a

particular person (e.g. a key account manager in a sales department). This person becomes

responsible for all issues connected with mutual cooperation including negotiations of various

deals.

The second approach to processes standardization is establishing a well defined and stable

negotiation based business processes such as sales and procurement with the consequence that

the substance of potential deals with business partners becomes standardized (even though the

set of partners might vary). Google Inc. is a good example of an organization with a well

defined product portfolio. So far Google’s strategy has been to focus on delivering fast and

19

reliable tools for searching and retrieving information from the Internet. Unlike the Internet

portal operators such as Yahoo or Lycos, Google has been generating revenues from the sales

of very limited number of search related products.14 This process indicates the migration

from the northwestern cell of our matrix eastwards to the northeastern one. Whenever such

process takes place, we are facing a situation in which routine with respect to substance can

develop allowing the reduction of the set of critical skills to those its elements which are

essential for successful negotiations with varying partners (communication and negotiation

skills).15

The movement between the cells has a significant impact on the set of critical skills necessary

for the negotiators to perform well in given types of situations. In the initial repetitions of

negotiation, the set of critical skills has to be relatively large and include all elements which

are necessary to cope with high variability of both matrix dimensions, namely communication

and negotiation skills together with creativity and analytical skills. It implies that at this

stage, complete negotiators are the most appropriate to deal with high complexity of the

negotiation process. If with repetitions, any of the dimensions becomes stable and/or

standard, the critical skill set can be reduced to these its elements which are required to cope

with the unstable or non-standard dimension. This should be also considered in the process of

task delegation. Reduced critical skill set allows for widening the set of potential candidates

for a particular position.

An important challenge connected with the process dynamics is certainly the transfer of

already developed routine from one person or department to another, i.e. from the CEO to a

sales director and from a sales director to a key account manager. Of course, it is possible to

document best practice guidelines in the form of a manual but since routine has a significant

tacit element, such guidelines do not necessarily cover the whole acquired knowledge

20

concerning the most efficient execution of given tasks. Hence the challenge is to find

appropriate channels to familiarize new persons with key elements of negotiation – partners

and/or substance.

(ii) As demonstrated above, with repetitions, routine acts tend to become increasingly

subconscious and patterned. As a consequence, they become inflexible and ineffective when

changes on any of the matrix dimensions occur. This is the case in which the acquired

routines may become dysfunctional and their application – ineffective. Such situation occurs

for instance, when a new person is introduced to represent the interests of long term customer.

Routine acquired through repetitions of negotiations with the predecessor can become

obsolete, especially if the new person demonstrates a completely different approach to

negotiation. In other cases the consequences can be even more unpleasant. For example, if

after once successfully agreed on, introduced and maintained in several repetitions, a

negotiator tacitly assumes the conditions of payment and delivery of the supplier as given and

does not negotiate them anymore (or negotiate only superficially), then he can be really

surprised by an unexpected unilateral change of these conditions by the partner.

Therefore one has to deal with routine very carefully. Changes on the matrix dimensions

systematically occur in particular if:

• New partners are identified e.g. as a result of geographic expansion, or extending the

product portfolio.

• The set of partners becomes unstable, the average length of the relationships shortens

and a high partner fluctuation occurs.

• New substance of negotiations is introduced e.g. through innovation-based extension

of the product or service portfolio.

• Negotiation’s substance becomes highly customized e.g. as a consequence of intense

21

market competition.

• Changes of the environment, for instance legal and political changes or changes in the

consumer’s preference structure.

It is important to point out that whenever any of these changes are identified, the above

described dynamics should be reversed inducing an east, north or northeastward movement

(depending on affected dimensions) in the matrix. In such situations, routine and resulting

best practice rules established over time become obsolete and may lead to highly ineffective

outcomes. Therefore, to assure its permanent usefulness, routine needs to be regularly

monitored and occasionally modified or even established anew in order to help obtain desired

efficiency gains in new conditions.

The challenge for the companies is to recognize promptly which cell of the matrix most

accurately describes their relationships with business partners and address this situation by

assigning the employees with the most appropriate set of skills to deal with them. It is also

possible that a particular company may be confronted with a situation that encompasses more

than one matrix cell. Such situations should be reflected in the organizational structure as it

is, for example, in case of Lycos Europe where two units – sales and business development –

were established to deal with two types of situations from the matrix. The responsibilities of

the sales department are limited to establishing initial contact with potential customers and

offering them packages consisting of the standard Internet advertising measures (such as e.g.

banners, buttons, key words, etc.) up to a certain deal size. The members of the business

development group negotiate all deals exceeding this threshold as well as those including

non-standard advertising solutions and strategic partnerships. The sales units are located

close to major customer clusters in major cities of the country whereas business development

is localized at the national headquarters of Europe, in Germany, where a small group of

22

people are responsible for large pan-European deals. In terms of the possessed skills,

business development managers can be safely considered complete negotiators whereas in

recruiting sales/key account managers the premium is put only on their communication and

negotiation skills. The size of both units varies over time but the sales unit has always

remained significantly bigger in terms of the headcount than the business development.

Conclusions

In this paper, we applied the findings of routine theory to the investigation of repeated

negotiations. We argued that negotiators can acquire routine in the course of repetition with

respect to two different dimensions: substance and partners. On this basis, we developed an

analytical framework to investigate the acquisition and application of routine in negotiations

and the inherent dynamics of this process. But what can we learn from this exercise? What

can routine theory contribute to the analysis of negotiations? What practical advice can be

derived from our research?

Routine theory assumes that in the result of planning and performing of an act, a person is

able to acquire specific knowledge about this very act. We call this learning acquisition of

routine. In this sense, explicit and implicit knowledge is the substance of routine. This

learning is the engine of all changes, making repetition also relevant for negotiations.

Routine theory points out the fact that repetition matters. The analytical framework we

developed allows the analysis of why and how negotiations change in the course of repetition.

By now, the analysis of repeated negotiation has always been restricted to specific aspects

like reputation or trust. In contrast, the routine approach is capable of covering all relevant

aspects of repeated negotiations by allowing us to model the development of knowledge it its

23

applications in further repetitions.

The systematic impact of repetition on the characteristics of negotiations has not been

investigated so far. In our paper, we focused on the following issues: decreasing planning

necessity and increasing efficiency on the one hand and increasing danger of ineffectiveness

on the other hand. As a result, we have demonstrated that it, indeed, makes an important

difference if we negotiate something for the first time or if we do so a second or repeated

time. Repetition has an important effect on how negotiations are carried out and, thus,

becomes a relevant factor for negotiation analysis.

These theoretical insights gain their importance particularly due to their practical

consequences. Let us conclude our paper by listing key learnings for practitioners that can be

derived from our research.

1. It is very important to analyze the structure of conducted negotiations and in particular

to check how standardized the substance of these negotiations is and how stable the set

of your partners remains (Figure 1). This analysis will show whether conducted

negotiations display a potential for developing routine.

2. Routine increases efficiency and saves resources. Therefore, it is useful to standardize

the processes, actively develop routine and establish best practice guidelines for

dealing with those negotiation situations that display stability in repetitions.

3. The organizational structure should be adjusted to the types of negotiations

(according to the dimensions of our matrix) conducted within the organization. Often

it is advisable to form specialized organizational units to deal with different types of

negotiations.

4. Routine is capable of substituting skills. Even complex negotiation settings do not

24

necessarily require fully skilled negotiators if sufficient routine has been acquired in

the past. Therefore resources can be saved if employees with matching skills are hired

and/or assign to conduct appropriate negotiations (Figure 2).

5. Changes in the environment can make routines obsolete and ineffective very quickly.

Therefore it is crucial to implement control mechanisms monitoring existing routines

and assuring that they do not become dysfunctional due to overlooked changes in the

environment.

Although routine has been researched already for some time, the application of this research

in negotiation theory seems to open a new, important and promising field. Some of the

concepts we mentioned in this paper such as the link between routine and organizational

structure and routine control mechanisms are new and still require additional work. There is

also a scarcity of empirical studies.16 However, we hope that because of the practical

relevance of this topic, these research gaps will soon be closed.

25

References

Abelson, R.P. 1981. Psychological Status of the Script Concept. American Psychologist 36:

715-29.

Abreu, D. 1988. On the Theory of Infinitely Repeated Games with Discounting.

Econometrica 56: 251-269.

Abreu, D. and Gul, F. 2000. Bargaining and reputation. Econometrica 68: 85-117.

Arrow J.K. 1962. The economic implications of learning by doing. Review of Economic

Studies 29: 155-173.

Becker, M.C. 2001. Empirical research on routines: The state of the art and its integration into

the routines debate. Unpublished working paper.

Becker, M.C. 2002. Routines - A brief history of the concept. In: I. Stavros and K. Nielsen

(Eds.), Economics and Social Sciences: Complements, Competitors, Accomplices.

Cheltenham: Edward Elgar.

Becker, M.C. 2004. Organizational routines: A review of the literature. Industrial and

Corporate Change 13: 643-678.

Blume, L.E. and Easley, D. 1995. What has the rational learning literature taught us? In

Learning and rationality in economics, edited by A. Kirman, and M. Salmon Oxford:

Basil Blackwell.

Burgoon, J.K., Buller, D.B. and Woodall, W.G. 1996. Nonverbal communication: The

unspoken dialogue. New York: McGraw-Hill.

Cabral, L.M. and Riordan, M.H. 1994. The learning curve, market dominance, and predatory

pricing. Econometrica 62(5): 1115 1140.

26

Cohen, M. 1991. Individual learning and organisational routine: Emerging connections.

Organisation Science 2: 135-139.

Cohen, M., Burkhard, R., Dosi, G., Egidi, M., Marengo, L., Warglien, M. and Winter, S.

1996. Routines and other recurring action patterns of organizations: Contemporary

research issues. Industrial and Corporate Change 5: 653-698.

Conlisk, J. 1996. Why bounded rationality? Journal of Economic Literature 34: 669-700.

Cross, J.G. 1977. Negotiation as a learning process. Journal of Conflict Resolution 21: 581-

606.

Dawson, R. 2003. Secrets of power negotiating. In Negotiation: Readings, Exercises, Cases,

edited by R.J. Lewicki, D.M. Saunders, J.W. Minton, B. Barry. New York: McGraw-

Hill Education.

Dick, A.R. 1991. Learning by doing and dumping in the semiconductor industry, The Journal

of Law and Economics 34: 133-159.

Doctoroff, S. 1998. Reengineering negotiations. Sloan Management Review. Vol. 39, No. 3:

63–71.

Dosi, G., Teece, D. and Winter, S.G. 1992. Toward a theory of corporate coherence: Some

preliminary remarks. In Technology and enterprise in a historical perspective, edited by

G. Dosi, R. Giannetti and P. A. Toninelli. Oxford: Clarendon Press.

Eisenhardt, K.M. and Martin, J.A. 2000. Dynamic capabilities: what are they? Strategic

Management Journal 21: 1105-1121.

Feldman, M.S. 2000. Organizational routines as a source of continuous change.

Organizational Science 6: 611-629.

27

Fisher, R. and Ury, W. 1999. Getting to yes: Negotiating an agreement without giving in.

Reprint. London: Random House.

Fundenberg, D., Kreps, D. and Maskin, E. 1989. Repeated Games with Long-run and Short-

run Players. Massachusetts Institute of Technology, Mimeo.

Fudenberg, D. and Levine, D.K. 1998. The theory of learning in games. Cambridge, Mass.:

The MIT Press.

Fundenberg, D. and Maskin, E. 1990. Nash and perfect equilibria of discounted repeated

games. Journal of Economic Theory 51: 194-206.

Goates, N., Barry, B. and Friedman, R. 2003. Good Karma: How Individuals Construct

Schemas of Reputation in Negotiation Contexts, 16th annual IACM Conference,

Melbourne, Australia.

Gulliver, P.H. 1979. Disputes and Negotiations: A Cross-Cultural Perspective. Orlando, Fla.:

Academic Press.

Head, C. 1992. Learning-by-doing and infant industries. PhD thesis, MIT.

Jeffrey, R.C. 1983. The logic of decision. 2d. ed. Chicago and London: University of Chicago

Press.

Jönsson, C. 2001. Cognitive Theory in International Negotiation: Analysis, Approaches,

Issues, edited by V. Kremenyuk. San Francisco: Jossey-Bass.

Kesting, P. 2005. Changing routine: mechanisms, possibilities, and obstacles. submitted

working paper, available under: http://www.whu.edu/csc/Kesting.pdf.

Kreps, D., Milgrom, P., Roberts, J., and Wilson, R. 1982. Rational Cooperation in the

Finitely-Repeated Prisoners’ Dilemma. Journal of Economic Theory 27: 245-252.

28

Langer, E.J. 1989. Mindfulness. Reading, MA: Addison-Wesley.

Lax, D.A. and Sebenius, J.K. 1986. The Manager as negotiator: Bargaining for cooperation

and competitive gain. New York: Free Press.

Lewicki. R.J. 1992. Negotiating strategically. In The Portable MBA in Management, edited by

A. Cohen. New York: John Wiley and Sons: 147-189.

Lewicki, R.J. and Bunker, B.B. 1996. Trust in Relationships: A Model of Trust Development

and Decline. In Trust in Organizations edited by R. Kramer, T. Tyler. Newbury Park:

Sage.

Lewicki, R.J. and Tomlinson, E. 2003. The Effects of Reputation and Post Violation

Communication on Trust and Distrust. IACM.

Lewicki, R.J. and Saunders, D.M. and Barry, B. 2006. Negotiation. McGraw-Hill Education.

Logan, G.D. 1980. Attention and automaticity in Stroop and priming tasks: Theory and data.

Cognitive Psychology 12: 523-53.

March, J.G. and Simon, H.A. 1958. Organizations. New York: Wiley.

McCracken, J. 2005. Ford Seeks Big Savings by Overhauling Supply System: No. 2 Auto

Maker Will Offer Larger and Longer Contracts But Use Fewer Companies. Wall Street

Journal. Sep 29.

Meerts, P.W. 2001. Training of negotiators. In International negotiation: analysis,

approaches, issues edited by V. Kremenyuk, San Francisco: Jossey-Bass.

Metty, T. et al. 2005. Reinventing the Supplier Negotiation Process at Motorola. Interfaces

35: 7-23.

29

Mnookin, R.H., Peppet, S.R. and Tulumello, A.S. 2000. Beyond winning: Negotiating to

create value in deals and disputes. Cambridge: Harvard University Press.

Mookherjee, D. and Ray, D. 1991. Collusive market structure under learning-by-doing and

increasing returns. Review of Economic Studies 58: 993-1009.

Nelson, R.R. and Winter, S.G. 1982. An evolutionary theory of economic change. Cambridge,

Mass. and London: The Belknap Press of Harvard University Press.

Pentlend, B.T. 2003. Conceptualizing and measuring variety in the execution of

organizational work process. Management Science 57: 857-870.

Pentland, B.T. and Rueter H. 1994. Organizational Routines as Grammar of Action.

Administrative Science Quarterly: 39: 484-510.

Pruitt, D.G. 2001. Strategy in Negotiation. In International negotiation: analysis, approaches,

issues, edited by V. Kremenyuk. San Francisco: Jossey-Bass.

Putnam, L.L, and Poole, M. 1987. Conflict and negotiation. In Handbook of Organizational

Communication: An Interdisciplinary Perspective edited by F. Jablin, L. Putnam, K.

Roberts, and L. Porter. New York: Praeger.

Rackham, N. 1980. The Behavior of Successful Negotiators. In Negotiation: Readings,

Exercises, and Cases, edited by R.J. Lewicki, D.M. Saunders, J. Minton, and B. Barry.

New York: McGraw-Hill/Irwin.

Raiffa, H. 1982. The art and science of negotiation. Cambridge, Mass. and London: The

Belknap Press of Harvard University Press.

Raiffa, H. 2002. Negotiation Analysis: The Art and Science of Collaborative Decision

Making. Cambridge, Mass. And London: The Belknap Press of Harvard University

Press.

30

Ross, W. and LaCroix, J. 1996. Multiple meanings of trust in negotiation theory and research:

A literature review and integrative model. International Journal of Conflict

Management, 7: 314-360.

Sander, F.E.A. and Bordone, R.C. 2005. Early Intervention: How to Minimize the Cost of

Conflict. Negotiation, March.

Schneider, W. and Shiffrin, R. M. 1977. Controlled and automatic human information

processing: I. Detection, search, and attention. Psychological Review, 84: 1-66.

Schumpeter, J.A. 1987. Unternehmer. Reprinted in Beiträge zur Sozialökonomik, edited by

Stefan Böhm. Wien: Böhlau.

Sheppard, B.H. 1995. Negotiating in Long term Mutually Interdependent Relationships

among Relative Equals. Research in Organizational Behavior 5: 3-44.

Sheppard, B.H., Tuchinsky, M. 1996. Negotiating Interfirm Relationships: A Grammar of

Pairs. Research in Organizational Behavior 18: 331-373.

Simon, H.A. 1955. A behavioral model of rational choice. Quarterly Journal of Economics

69: 99-118.

Simon, H.A. 1956. Rational choice and the structure of the environment. Psychological

Review 63: 129-138.

Simon, H.A. and March, J.G. 1958. Organizations, Wiley: New York.

Teece, D.J., Pisano, G. and Shuen, A. 1997. Dynamic capabilities and strategic management.

Strategic Management Journal 18: 509-533.

Thomas, K. 1976. Conflict and conflict management. In Handbook of Industrial and

Organizational Psychology, edited by M.D. Dunnette. Skokie: Rand McNally.

31

Thomson, L.L. 2005. The Mind and Heart of the Negotiator. Upper Saddle River, NJ: Pearson

Education International.

von Wright, G.H. 1987. Preferences. In The new Palgrave. A dictionary of economics, edited

by J. Eatwell, M. Milgate and P. Newman. London: Macmillan.

Walton, R.E. and McKersie, R.B. 1965. A behavioral theory of labor negotiations: An

analysis of a social interaction system. New York: McGraw-Hill.

Wheeler, M. 2004. Nonverbal Communication in Negotiation. Cambridge, Mass.: Harvard

Business School.

Winham, G.R. 2001. Simulation for teaching and analysis. In International negotiation:

analysis, approaches, issues, edited by V. Kremenyuk. San Francisco: Jossey-Bass.

Winter, S.G. 2003. Understanding dynamic capabilities. Strategic Management Journal 24:

991-995.

Zartman, I.W. and Berman, M. 1982. The Practical Negotiator. New Haven, Conn.:Yale

University Press.

Zollo, M. and Winter, S.G. 2002. Deliberate learning and the evolution of dynamic

capabilities. Organization Science 13: 339-351.

32

Endnotes

1 Repetition of strategic interaction has also has been a vast topic in game theory literature.

Some of the aspects discussed there include: solution concepts in repeated games (e.g. Abreu

1988; Fundenberg and Maskin 1990), emergence of cooperation (e.g. Kreps, Milgrom,

Roberts and Wilson 1982; Axelrod 1984), reputation (e.g. Fundenberg, Kreps and Maskin

1989; Abreu and Gul 2000) and information and learning (e.g. Blume and Easley 1995;

Fundenberg and Levine 1998). However, due to its underlying rationality assumptions, game

theory is of limited relevance to our analysis.

2 The alternative would be to define routine on the physical level of action taking as a ‘pattern

of activity’ (Dosi, Teece and Winter 1992; Feldman 2000). But this approach makes it

difficult, if not impossible, to investigate the interplay of deliberate planning and sub-

conscious repetition in action taking (see also the discussion in Kesting 2005).

3 Such solutions usually materialize the results of former planning and experiences. But they

can also be acquired by observation and imitation.

4 This current research on routine has some proximity to the script concept, as developed

already in the 1970s in cognitive psychology. According to this theory, scripts are ‘mental

representations, embodying knowledge of stereotype event sequences.’ (Abelson 1981: 715).

Script theory, thus, particularly throws some light on the question of how routine is mentally

developed and structured. A somewhat similar approach in routine research is that of

Pentland and Rueter (in particular 1994), understanding organisational routines as ‘grammar

of action.’

5 The nature and mechanisms of automation of act have been a research issue in the

psychological literature already in the late 1970s, early 1980s. See Schneider and Shriffin

1977 and Logan 1980.

33

6 Problem solving can also be considered being one of the negotiator’s strategies (Pruitt

2001). It is demonstrated when negotiators try to identify options that satisfy both parties’

goals. This strategy has also been labelled as collaboration (Thomas 1976), integrative

bargaining (Walton and McKersie, 1965), or creating value (Lax and Sebenius 1986;

Mnookin, Peppet and Tulumello 2000).

7 Other related aspects such as the variability of the process or changes in the environment are

also incorporated in the framework since they only become relevant for negotiations when

they affect one or both of its dimensions: substance or partner.

8 Moreover, it is generally assumed in the literature that individual skills are also outcomes of

systematic training (Meerts 2001; Winham 2001). Training of negotiators is usually based on

unspecific repetitions in artificially created context (e.g. simulations).

9 Rackham (1980) describes empirical research results demonstrating similarities and

differences between skilled and averaged negotiators with respect to planning. These results,

though very interesting, do not consider either of our framework dimensions and therefore

cannot be directly compared to ours.

10 See Metty 2005: p. 7.

11 Of course, it still allows building in some kind of controlling procedures, indicating when it

is necessary to turn away from routine control and back to conscious action planning.

However, to find reliable mechanisms often proves rather difficult.

12 In this and the following paragraphs we assume that the respecting negotiations are not

minor, but have a significant importance for the company. Otherwise, such a narrow

attribution of responsibilities appears not necessary.

13 A pioneer in the field was the Boston Consulting Group that started applying the

implications of the learning curve already in 1972 in their client engagements.

34

14 Like for example Google AdWords and Google AdSense. See

http://www.google.com/ads/index.html, January 2006.

15 Sometimes it may be useful to speak also about the standardization of the negotiation

process itself, especially in the context of designing or reengineering it (Sander/Bordone

2005; Doctoroff 1998). However, as mentioned earlier, for simplicity reasons we decided not

to introduce process as a separate dimension but rather treat it as a part of the existing ones.

16 Several psychological experiments illustrating the existence and the implications of

mindlessness are quoted by Langer (1989). Although the concepts of mindlessness and

routine seem to be related, they display significant difference in terms of their central focus.

Mindlessness concentrates on lack of situational awareness and conscious control as well as

automation in task performance whereas routine can be also consciously acquired and

applied.