Why fairness is a fallacy when it comes to business negotiations

From a very young age, we’re taught about the value of fairness. Growing up, my mum’s value for fairness ensured that my sister and I always had an equal amount of money spent on us for our

birthdays, whether it was giving us money, a helping hand for a home deposit or a gift. My mum made sure neither of us was benefiting more than the other. The sense of fairness she instilled in me was that it equalled 50:50.

The role fairness played in my life continued into adulthood and into relationships where I financially contributed 50:50. Fairness meant equal, right? Wrong. I learned that some of my friends

and colleagues had different perspectives on what was fair. They approached finances differently in their relationships. Some would contribute based on their percentage of the combined earnings, and others would pool everything together in one family account and spend without concern for how much each person contributed — it was ‘family money’, and that was fair.

What it taught me about fairness was that it is subjective, and that people have very different ideas of what is fair. As a simple example, what if I give you an orange and tell you to share it fairly with me? Would you cut it in half and share it? Would that be fair? What if I only needed the zest and you were interested in the juice? Would that be a good deal? It leaves both of us not getting what we want — fairness isn’t the answer to getting the best outcome.

The challenge with fairness is that, even if at a human level we all understand and acknowledge life isn’t fair, our need for fairness can be as strong as our need to be valued. So, in negotiations, the agreements we seek to make must give the perception of being fair in the eyes of the other party or else they won’t want to agree to the deal.

Imagine you bought a lottery ticket and ended up winning $5 million. The only condition attached to you being able to keep it is that you share it with a friend. The rules of the lottery are clear and visible to everyone, so your friend is aware of the rules too. You have been asked to select the percentage you will offer your friend. You get one offer only, and they must either accept your offer or reject it. If they reject the offer, neither party gets to keep anything. If they accept, you both walk away with money. What would you offer?

I ask participants to role-play a similar scenario in my workshops, and the outcomes I get are usually very different across each of the pairings. Some get deals, others don’t. Applying logic would say we should always accept the deal because we both walk away with money that we didn’t have before. But negotiations aren’t logical; they are emotional decisions that we justify with logic. Fairness, we must remember, is very subjective. So even if you think you’re being fair, the other party may reject the deal because they didn’t feel the same way.

In seeking to be fair, at best, you walk away with 50 per cent of the available value and, at worst, you walk away with significantly less. If you remember only one thing, remember this: fairness is a fallacy. Your objective isn’t to be fair but to maximise the exchange of value by discovering each party’s needs and positioning value appropriately.

Written by Glin Bayley.

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