Across cultures, dining together is a common part of the process of reaching negotiated agreements. In Russia and Japan, important business dealings are conducted almost exclusively while dining and drinking and in the U.S., many negotiations begin with "Let's do lunch." But are business deals actually improved when people discuss important matters over a meal?
To explore this question, I conducted two experiments. The first compared negotiations that took place over a meal in restaurants to negotiations in conference rooms, without any food to eat. In the second, negotiations were conducted with or without a meal in a business conference room. In the experiments, 132 MBA students negotiated a complex joint venture agreement between two companies. In the simulation, a provisional deal is in place, but a variety of terms must still be considered and agreed upon to maximize profits for their companies. The negotiators must determine how to handle each term of the deal. As is typical in many negotiations, in order to maximize their profits, the negotiators must share information and work together with the other side to learn where the most value can be created.
The greatest possible profits were created by the parties who were able to discern the other side's preferences and then work collectively to discover the profit maximizing outcomes for the joint venture, rather than merely considering their own company's profits. In the simulation, this can only be accomplished when the negotiators make trade-offs and then compensate each other from the net gains to the joint venture. The maximum value that can be created jointly for both companies is $75 million. Deals can be struck at lower combined values, down to as low as $38 million. To explore how eating together affected negotiation outcomes, I considered the total value created by both companies.
The students who ate together while negotiating -- either at a restaurant or over food brought into a business conference room -- created significantly increased profits compared to those who negotiated without dining. (Individuals who negotiated in restaurants created 12 percent greater profits and those who negotiated over food in a conference room created 11 percent greater profits.) This suggests that eating while deciding important matters offers profitable, measurable benefits through mutually productive discussions.
I designed a third experiment to test if it was in fact the act of eating together and not merely sharing a separate task that led to the better negotiated outcomes. I had 45 MBA students negotiate the same simulation, but instead of negotiating while eating, half of the groups negotiated while completing a jigsaw puzzle that had nothing to do with the negotiation. In this experiment, I found that the negotiators who shared a common task did not create better negotiation outcomes than those who only negotiated the deal.
I expected that both sharing a meal and collaborating on an activity would increase trust between the participants -- and perhaps that the cultural history attached to eating together would increase trust more than sharing other activities -- but when I surveyed participants in both studies, the trust levels they reported did not increase.
Why else might eating together improve the outcome of negotiations? There may be biological factors at work. When the negotiators in my first two studies ate, they immediately increased their glucose levels. Research has shown that the consumption of glucose enhances complex brain activities, bolstering self-control (PDF) and regulating prejudice and aggressive behaviors. Other research has shown that unconscious mimicking behaviors of others leads to increased pro-social behaviors; when individuals eat together they enact the same movements. This unconscious mimicking of each other may induce positive feelings towards both the other party and the matter under discussion.
In future experiments, I will continue to explore the reasons why eating while deciding important matters increases the productivity of discussions. In the meantime, you would be wise to suggest "doing lunch" whenever you meet to negotiate.
This piece first appeared on the Harvard Business Review online.
Lakshmi Balachandra is an Assistant Professor of Entrepreneurship at Babson College and a Fellow at the Women and Public Policy Program at the Harvard Kennedy School of Government. She researches how entrepreneurs can successfully negotiate with investors.