Wednesday, June 18, 2008

Don't Win a Pyrrhic Victory

By: Malhotra, Deepak, Ku, Gillian, Murnighan, J. Keith,
Harvard Business Review,
May 2008, Vol. 86, Issue 5

Some interesting points

There is strong evidence that competitive arousal has fueled many high-profile business mistakes. In a variety of contexts - be they auctions, negotiations, legal disputes, mergers and acquisitions, employee promotion contests, or the pursuit of hot managerial talent - decision makers can easily become fixated on beating their competitors.

There is nothing necessarily irrational about incurring a cost to win; people enjoy winning - especially against their rivals - even at a price. There may actually be strategic benefits in doing so: If winning a contract will damage a competitor for the long term, it may make sense to pay more than fair value for that victory. But cases like that require a clear, upfront analysis of the limits of acceptable losses and the benefits that winning will yield.

When analyses are conducted in the heat of the moment, competitive arousal crowds out clarity. The result is often a Pyrrhic victory.

Managing Competitive Arousal

The risk factors for competitive arousal are ever present: Managers and executives must constantly deal with rivals, make quick decisions, and operate in the public eye. They can minimize the potential for competitive arousal as well as the harm it can inflict by following two broad strategies: avoiding certain types of competitive interaction and mitigating the risk factors.

Mitigating the risk factors.

Defusing rivalry: It is helpful to remember that competitors are simply parties with their own interests. Like you, they are probably smart, reasonably rational, and somewhat emotional. Don't see competitors as the nemesis. Of course, it is not always easy to control your feelings about rivals, but understanding your competitor's perspective can promote cool, rational decision making, even in tough competitions.

Reducing time pressure:Effective decision makers create time to reevaluate the bases of their value calculations, to discuss substantive issues, and to negotiate. Because individuals consistently underestimate the time needed for complicated tasks - and consistently overestimate their ability to make wise decisions, particularly under time pressure - it is easy to set ill-considered deadlines that lead to bad decisions.

Deflecting the spotlight.

Deepak Malhotra ( is an associate professor of business administration at Harvard Business School in Boston. He is the coauthor, with Max Bazerman, of Negotiation Genius (Bantam, 2007). Gillian Ku ( is an assistant professor of organizational behavior at London Business School. J. Keith Murnighan ( is the Harold H. Hines Jr. Distinguished Professor of Risk Management at Northwestern's Kellogg School of Management in Evanston, Illinois.

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