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NEGOTIATION
DISCOURAGE LITIGATION
"Discourage litigation. Persuade your neighbors to compromise whenever you can.
Point out to them how the nominal winner is often a real loser: in fees, expenses and
waste of time. As a peacemaker the lawyer has a superior opportunity of being a good
man. There will still be business enough." - Abraham Lincoln
HAWAII REVISED STATUTES HRS 605-7
Control of action; power to settle.
The practitioners licensed by the supreme court shall have control to judgment and
execution, of all suits and defenses confided to them; provided that no practioner shall have power
to compromise, arbitrate, or settle such matters confided to the practitioner, unless upon special
authority in writing from the practitioner's client.
- Negotiations p. 1 -
- Anonymous
If you are patient in one moment of anger, you will escape a hundred days of sorrow.
- Chinese Proverb
It is often better not to see an insult than to avenge it.
- Seneca
- Negotiations p. 2 -
We are not in charge of what happens in the world; we are in charge of how we respond to what happens.
It's always like this kid. Two guys make a deal. They always know something, the other guy doesn't. -From
L.A. Times, by Stuart Woods
It is a luxury to be understood.
- Jonathan Swift
I personally think we developed language because of our deep inner need to complain.
- Jane Wagner and Lily Tomlin
There's not a lot of traffic on the extra mile.
Anyone who doesn't think there are two sides to an argument is probably in one.
- Sam Horn, Tongue Fu.
I never saw an instance of one or two disputants convincing the other by argument.
- Thomas Jefferson
Tact is the art of making a point without making an enemy.
Patience is never more important than when you're on the verge of losing it.
It is better to swallow words than to have to eat them later.
To speak ill of others is a dishonest way of praising ourselves.
I have never been hurt by anything I didn't say.
The greatest remedy for anger is delay.
- Franklin D. Roosevelt
- Will Durant
- Calvin Coolidge
- Seneca
Our task is not to fix the blame for the past, but to fix the course for the future.
- John F. Kennedy
The only way to get the best of an argument is to avoid it.
Sticks and stone can break my bones, but words can break my heart.
You can't build a relationship with a hammer.
Of course I'm yelling. That's because I'm wrong.
- Dale Carnegie
- Robert Fulghum
- Anonymous
- Leslie Charles
- Negotiations p. 3 -
- Auguste Rodin
- Anonymous
- Anais Nin
If the only tool you have is a hammer, you tend to see every problem as a nail.
- Abraham Maslow
Most anger is a cry for attention.
Conversation in the United States is a competitive exercise in which the first person to draw a breath is
considered the listener.
- Nathan Miller
If you are not listening, you are not learning.
If you want to lift yourself up, lift up someone else.
The hardest thing to learn in life is which bridge to cross and which to burn.
- Negotiations p. 4 -
Many of the tactical moves in positional negotiation revolve around shaping the perceived bargaining range.
Opening demands are particularly significant because they are the first actions which begin to influence the
perceptions of the bargaining range.
Basic Rule:
The general advice about the first offer is to be extreme within reason. The higher you start, the higher you
are likely to end up.
Kissinger:
Henry Kissinger said, "If the final agreement will be between the two starting points, there is no point being
moderate. Be far more extreme than what you are willing to accept. The more outrageous your first offer,
the more likely that what you 'really' want looks like a compromise."
Why High?:
Why should you start high? The experimental evidence suggests that once two offers are on the table, the
best prediction of the final contract is the mid-point between the bids, provided that the mid-point is within
the bargaining range.
Low Demand: If the opening demand is too low, you lose the possibility of a more favorable settlement.
2)
High Demand: If the opening demand is too high, you may make your opponent mad. The other side will walk
away even though there is was plenty of room between the bottom lines to reach an
agreement.
Maybe the other side will misjudge the negotiating situation and their first offer will be low.
- Negotiations p. 1 -
GETTING PAST NO
Basic Principles from the book
by William Ury
Whether you are negotiating with a hostage-taker, your boss, or your teenager, the basic principles remain
the same. In summary, the five steps of what the author calls "breakthrough negotiation" are:
1.
Go to the Balcony. The first step is to control your own behavior. When your opponent says no or
launches an attack, you may be stunned into giving in or counterattacking. So, suspend your reaction by naming
the game. Then buy yourself time to think. Use the time to figure out your interests and your BATNA. Throughout
the negotiation, keep your eyes on the prize. Instead of getting mad or getting even, focus on getting what you
want. In short, go to the balcony.
2.
Step to Their Side. Before you can negotiate, you must create a favorable climate. You need to defuse
your opponent's anger, fear, and suspicions. He expects you to attack or to resist. So do the opposite: Listen to
him, acknowledge his point, and agree with him wherever you can. Acknowledge his authority and competence, too.
Disarm him by stepping to his side.
3.
Don't Reject . . . Reframe. The next step is to change the game. Instead of rejecting your opponent's
position--which usually only reinforces it--direct his attention to the problem of meeting each side's interests. Take
whatever he says and reframe it as an attempt to deal with the problem. Ask problem-solving questions, such as
"Why is it that you want that?" or "What would you do if you were in my shoes?" or "What if we were to . . . ?"
Rather than trying to teach him yourself, let the problem be his teacher. Reframe his tactics, too: Go around stone
walls, deflect attacks, and expose tricks. To change the game, change the frame.
4. Build Them a Golden Bridge. At last you're ready to negotiate. Your opponent, however, may stall, not yet
convinced of the benefits of agreement. You may be tempted to push and insist, but this will probably lead him to
harden and resist. Instead, do the opposite--draw him in the direction you would like him to go. Think of yourself as
a mediator. Involve him in the process, incorporating his ideas. Try to identify and satisfy his unmet interests,
particularly his basic human needs. Help him save face and make the outcome appear as a victory for him. Go
slow to go fast. In sum, make it easy for him to say yes by building him a golden bridge.
5.
Bring Them to Their Senses, Not Their Knees. If your opponent still resists and thinks he can win without
negotiating, you must educate him to the contrary. You must make it hard form him to say no. You could use
threats and force, but these often backfire; if you push him into a corner, he will likely lash out, throwing even more
resources into the fight against you. Instead, educate him about the costs of not agreeing. Ask reality-testing
questions, warn rather than threaten, and demonstrate your BATNA. Use it only if necessary and minimize his
resistance by exercising restraint and reassuring him that your goal is mutual satisfaction, not victory. Make sure he
knows the golden bridge is always open. In short, use power to bring him to his senses, not his knees.
The breakthrough strategy requires you to resist normal human temptations and do the opposite of what you
usually feel like doing. It requires you to suspend your reaction when you feel like striking back, to listen when you
feel like talking back, to ask questions when you feel like telling your opponent the answers, to bridge your
differences when you feel like pushing for your way, and to educate when you feel like escalating.
At every turn the strategy calls on you to choose the path of indirection. You break through by going around
your opponent's resistance, approaching him from the side, acting contrary to his expectations. The theme
throughout the strategy is to treat your opponent with respect--not as an object to be pushed, but as a person to be
persuaded. Rather than trying to change his mind by direct pressure, you change the environment in which he
makes decisions. You let him draw his own conclusions and make his own choice. Your goal is not to win over him
but to win him over.
- Negotiations p. 2 -
- Negotiations p. 3 -
2.
Nonspecific Compensation.
One side gets their objectives and the other side is paid off for accommodating
the other's interests.
Example: W tells H that if he goes to the seashore, she will buy him a new
set of golf clubs.
3.
Logrolling.
If two or more issues are in disputes, the negotiators may be able to do a series
of trade-offs. One side gets their top priority on the first issue and the other side
gets their top priority on the second issue.
Example: H wanted an inexpensive cabin; W wanted a luxury hotel. If W
prefers quality of accommodations to the place, a luxury hotel in the mountains
might meet both their needs.
4.
Cost Cutting.
One side gets their objectives and the other's sides costs are reduced by going
along with the first side.
Example: H likes a quiet, peaceful vacation; W likes the beach because of
all the activity. An inexpensive place on a isolated beach may fit the needs of
both.
5.
Bridging.
The parties are able to invent new options that meet each side's needs and
interests.
Example: H really wants to hunt and fish; W want to swim, shop, and enjoy
the nightlife. Maybe they can find a resort that has all of these.
- Negotiations p. 4 -
The goal is to encourage people to resolve their differences by reconciling their interests, and if
that is not possible, then to use low-cost methods to determine rights.
The recent "win-win" negotiation advice suggests replacing traditional "hard bargaining" over
rigid positions, in which the focus is on power, with problem-solving negotiation, in which the focus is
on creatively reconciling interests.
New alternative dispute resolution (ADR) methods are aimed at replacing rights-based
procedures (such as litigation) with interests-based procedures (such as win-win negotiation and
problem-solving).
- Negotiations p. 5 -
- Negotiations p. 6 -
5 FACTORS
FOR PLANNING
1) PEOPLE
What are the past histories and present feelings of the people involved in this
negotiation? What are their goals and objectives? Who is more powerful and
what is the source of that power? What influences can they bring to bear on this
negotiation? What do you know about their negotiating style?
2) RELATIONSHIP
Do the negotiators or their constituents have any history together? What was
that prior relationship like? How are they getting along now during the
negotiation? Do they have a good relationship? Is it strained? Have they just
met for the first time? Will the parties have a continuing relationship or will this be
a "one-shot" negotiation? Even if the parties are not likely to work together in the
future, will reputations be made in this negotiation that will follow the negotiators
in the community?
3) ISSUES
The issues involved in the negotiation are the topics to be negotiated. They are
also the questions and concerns that each party raises during the negotiation. It
is usually very helpful to frame the issues as questions to be answered rather
than statements that are made.
4) POSITIONS
The positions in the negotiation are the solutions that each person has in mind.
Positions are the "What" that the negotiators want. Many different positions are
considered during a negotiation including, the opening position (demand), a fall
back position, a bottom line, and a BATNA (Best Alternative To A Negotiated
Agreement).
5) INTERESTS
Interests are the basic needs that negotiators seek to be met in any agreement.
If you know the interests, you know "why" the negotiators take the positions they
do during the negotiations. Maslow's hierarchy of needs is helpful here.
- Negotiations p. 7 -
PEOPLE
Who:
RELATIONSHIP
Past:
ISSUES
1.
POSITIONS
When to disclose?
INTERESTS
OPTIONS
1.
1.
2.
2.
3.
3.
4.
4.
Initial:
2.
Current:
First Fallback:
US
Negotiation
Styles:
3.
Bottomline:
4.
BATNA:
5.
Desired:
Ways to improve:
Who:
Past:
1.
Estimated Initial:
Negotiation
Styles:
Current:
2.
Estimated Bottomline:
Estimated:
7.
Disclosed:
THEM
3.
Desired:
6.
Estimated BATNA:
4.
- Negotiations p. 8 -
TIPS
FOR NEGOTIATING WITH A COMPETITIVE
NEGOTIATOR
Flinch.
Take time out.
Remember your BATNA!
Get another opinion.
Ask "how" they will negotiate.
If they don't know what "win-win" means,
they won't be negotiating that way.
Avoid multiple concessions
if your concessions are
not matched by their concessions.
Recognize "dirty tricks"
and comment on them immediately.
- Negotiations p. 9 -
- Negotiations p. 10 -
2.
3.
4.
Deal from strength if you can, but create the appearance of strength, regardless.
5.
6.
Recognize that the other party is probably holding back valuable information.
7.
Flinch to create doubt in the counterpart's mind and to add value to a concession.
8.
Find out what your counterpart wants. Don't assume that their wants are the same
as yours.
9.
10. Keep your counterpart in the dark about your strategy and your stake in the deal.
11. Try to get your counterpart to lower to lower his/her level of aspiration.
12. Ask questions if you do not understand what is going on. Do not let your
counterpart deliberately confuse you.
13. Answer a question with a question to avoid giving away information needlessly.
14. Invoke the higher authority to buy more time.
15. Information is power - get as much as possible.
16. Verify anything you are told that you do not know to be a fact.
17. Be cooperative and friendly. Avoid abrasiveness, which often breaks down
negotiations.
18. Use the power of competition. Remember that power can be real or imaginary.
- from It's Negotiable, by Peter Stark (1994)
- Negotiations p. 11 -
Brainstorming
Blanketing
Bracketing
Intimidation
Undermining
Surprise
Change in approach. Show you have information the other side does
not expect. Present new proposals or demands. Emotional outburst.
Feinting
Salami
Forbearance
To postpone for a period of time. Take time out. "Let's take a break."
Deadline
Good Guy,
Bad Guy
One person acts tough, a second person acts nice - hoping to induce
a concession.
Limited
Authority
Fait Accompli
Silence
By using silence, you hope the other side will speak (to their
disadvantage).
Apparent
Withdrawal
Make opponent think you are unwilling to discuss the issue further.
The goal is to get them to reduce or give up their demand.
Reversal
- Negotiations p. 12 -
NEGOTIATING TACTICS
Professor John Barkai
University of Hawaii Law School
AGGRESSIVENESS
ANCHOR
ANGER (Real or Fake)
APPARENT WITHDRAWAL
BACKTRACKING OR UNRAVELING
BLAMING or FAULT-FINDING
BLAND WITHDRAWAL
BOULWAREISM (Take-it-or-leave-it)
DEADLINES
DEADLOCK AND CONCEDE
DRAFTING THE AGREEMENT
DRAFTSMAN OR SINGLE NEGOTIATING TEXT
DUMB IS SMART AND SMART IS DUMB
ESCALATION
EXPLAIN OFFERS AS GAINS
EXPOSE THE JUGULAR
FAIT ACCOMPLI
FALSE DEMANDS
FALSE SCARCITY
FEEL, FELT, FOUND
FEINTING
FIRST OFFER-LARGE DEMAND
FLINCH
FORBEARANCE
GOOD-GUY BAD-GUY
HIGHER AUTHORITY
HOT POTATO
INDUCED COMPETITIVENESS
INSCRUTABILITY
LIMITS
LINKAGE
LOW BALLING
MISLEADING CONCESSION PATTERN
NIBBLE
- Negotiations p. 13 -
- Negotiations p. 14 -
NEGOTIATING TACTICS
Professor John Barkai
University of Hawaii Law School
PLEASE UNDERSTAND THAT NEGOTIATION TACTICS PROBABLY
WORK BEST BETWEEN PEOPLE WHO DO NOT KNOW EACH OTHER WELL
AND WHO WILL NOT BE WORKING TOGETHER IN THE FUTURE. WHEN
YOU ARE NEGOTIATING WITH YOUR FAMILY, FRIENDS, CO-WORKERS,
AND OTHER BUSINESS ASSOCIATES, THINK ABOUT OVERALL
NEGOTIATION STRATEGIES AND ABOUT INTERESTS RATHER THAN
SIMPLY ABOUT NEGOTIATION TACTICS.
When some people come to a course about negotiations, they hope to learn negotiation
tactics that will make them a better negotiator. Negotiation tactics are specific negotiation
behaviors that are used during negotiations. Sometimes tactics are considered the "tricks" of
negotiation. Some tactics are part of the normal, ethical behavior that takes place during
negotiations. Other tactics are considered to be "dirty tricks." Many of the tactics are not true
tactics but are really just personal styles of behavior of people who are engaged in conflict.
Tricks, however, are not likely to make you a better negotiator. Understanding the
negotiation process is the most critical thing to learn about negotiations. Nonetheless, most
people do hope to learn some new tactics at a negotiation course, and hopefully you have
learned some new tactics here. But if you are interested in more tactics, a whole range of tactics
are listed on the following pages. As the tactics are set forth here, no value judgment is made as
to their honesty or usefulness in negotiation.
NEGOTIATING TACTICS
AGGRESSIVENESS
Aggressiveness or the lack of it may be an unchangeable part of one's personality. It
might be useful in negotiations to force the other side into concessions or to make errors.
As with anger, aggressive or competitive behavior is likely to provoke a similar response
from the opposing negotiator.
- Negotiations p. 15 -
ANCHOR
Anchoring is fixing or establishing the focus of discussion around a certain point, whether it
is a figure, a range, or and issue, simply by asserting it. Anchoring plays on the human
tendency to fix attention on, and be influenced by, what someone says.
APPARENT WITHDRAWAL
The negotiator appears to have withdrawn from the process and yet still has the
negotiation covered through an associate or by other means.
BACKTRACKING OR UNRAVELING
After a few issues appear to be settled, a negotiator, to get his way on a new
issue, may threaten to undo the earlier agreements.
BLAMING or FAULT-FINDING
Blaming or assigning fault is an aggressive tactic which may invoke conciliatory behavior,
either because of induced guilt feelings or a sensed need to mollify. It may focus
negotiation on a substantively irrelevant, but psychologically volatile or conflictual, issue.
BLAND WITHDRAWAL
One of the negotiators might leave the negotiation without showing emotion or giving an
explanation. A negotiator might take some action and then claim that he did not know that
he was doing something in a way that the other side would object to.
BOULWAREISM (Take-it-or-leave-it)
Lemuel Boulware, former labor negotiator at GE in the 1940s, would do his research and
make what he thought was a fair and reasonable offer to the union. There was only one
offer made. Boulware did not offer any later concessions. It was "Take it, or leave it."
This tactic will not work if the other negotiator expects you to make high demands with
later concessions. In labor negotiations, such a tactic is now considered an unfair labor
practice and is illegal.
DEADLINES
Set deadlines when you want them. "I need your answer by tomorrow at 3 p.m." Ignore
deadlines when you do not want them.
- Negotiations p. 16 -
ESCALATION
Most negotiations progress from a set of initial high demands, through a series of
concessions, to a final, lower settlement. Sometimes a negotiator will break away from
this pattern and actually increase or escalate the demands during the course of the
negotiations.
FAIT ACCOMPLI
You present your opponent with a completed and seemingly unchangeable action. Your
opponent accepts rather than opening up the process again. For example, you can send
back a signed contract, but one in which you have made changes. You send a signed
check, but for less money than what they other side wanted.
FALSE DEMANDS
False demands are similar to making large demands. False demands are extra issues
that the negotiator added to the initial demand so that they can be traded away as
concessions. Both false and large demands help to disguise the true bottom line and
interests of the negotiator.
- Negotiations p. 17 -
FALSE SCARCITY
Psychologically when faced with a limited commodity, or the commodity becomes scarce
or restricted, people react by wanting more of it than when it was more available.
Negotiators use this psychology be suggesting that the opportunities are quite limited.
3)
FEINTING
An apparent move in one direction is used to divert attention from a move in the other
direction. You look left, and then pass to the right. Mislead them as to your present
intention. You stress goals that are unimportant to you and then give them up for
concessions from the other side that are important to you.
FLINCH
React visibly (flinch) when you first hear the offer. Your nonverbal communication (you
can add the verbal too) says "That is much too much!"
FORBEARANCE
Forbearance calls for delaying, holding off, and stalling rather than giving an immediate
response to your opponents requests. If you concede too quickly, your opponent might
gain a psychological advantage. Delaying your response might cause your opponents to
rethink their positions. Even when you know that you will reject their offer, if you delay
rather than give an immediate "no," you appear to have thoughtfully considered their
idea.
GOOD-GUY BAD-GUY
The bad-guy works with you first. He leaves the room and his partner, the good-guy,
takes over and apologizes for the other guy's behavior. The good-guy appears to be your
friend. He'll make you a good deal. Guess what? They are working together.
HIGHER AUTHORITY
The negotiator appears to agree with your position, but has to report to a higher authority.
The higher authority is never present, and of course says "No deal" on those terms. This
tactic is very common when buying a new car. "I'd like to give it to you at the price we
talked about," says the salesperson, "but the boss said 'no.'" It is helpful to claim you
must take the proposal to a higher authority, - your client, boss, partner, spouse, mother,
etc.
- Negotiations p. 18 -
HOT POTATO
If they hand you a big problem, try to hand it back to them immediately or at least let the
stream out the potato.
INDUCED COMPETITIVENESS
Induced competitiveness converts what would ordinarily be a two party
negotiation into a multi-party negotiation where all the parties interested in a
particular good are forced to compete with one another for it. The
competition makes the item more desirable and drives up its price. An
alternative way of inducing competitiveness is to create an auction for the
item.
INSCRUTABILITY
Inscrutability often comes from using silence and not offering any reactions. This is the
classic poker player's tactic. Don't let them read your cards by reading your face.
Actually, the face often will not leak out nonverbal reactions. Look to the hands and feet
for the nonverbal leakage.
LIMITS
Negotiators can either set and respect limits or refuse to acknowledge them. If the
legislative session must end at midnight, the limits can be changed by unplugging the
clock.
LINKAGE
Linkage attempts to expand the scope of a negotiation by bringing in issues
which, while not clearly related, one can make a plausible case for
considering. The effect is to change bargaining power and leverage, or to
change the focus and character of the dispute or the set of gains or
opportunities the parties are trying to decide. Adding issues or parties can
change the dynamics of negotiation.
LOW BALLING
The negotiator makes a low offer to attract the other side, but there is no intention of
going through with the deal on the terms offered. Later, they will say that there are
"additional" charges or that the circumstances have changed. This is a "bait-and-switch"
tactic.
- Negotiations p. 19 -
NIBBLE
The deal is done, or at least it looked that way. Now one of the negotiators asks for one
more small concession. The concession is so small that the other party often gives in just
so not to upset the deal.
PERSISTENCE
No. No. No. Be persistent in your resistance. Say "no" until your tongue bleeds. The
refusal to move can test the other sides firmness and uncover just how much concession
room there is.
PRECONDITION DEMANDS
Setting a precondition to negotiation is a way of obtaining a concession without giving
any in return. Demanding satisfaction of a precondition may not only gain a concession
without cost, it may also reveal how eager the other side is to secure a deal. The
response to this tactic is to be clear you consider the precondition a part of the
negotiation, and that you expect a reciprocal concession.
PRINCIPLE
Appeals to principle are often highly persuasive. One good way to prepare
for negotiations is to develop arguments of principle for the positions one
takes.
RED HERRING
A red herring is a false, yet highly distracting, issue that a party can use to
bring pressure to bear on the other side. It is most useful in negotiations
where the parties represent outside constituencies that can be manipulated
to pressure a recalcitrant party. The false demand tactic is a version of the
red herring.
REINFORCEMENT AND REWARD
- Negotiations p. 20 -
REVERSAL
You move in the opposite direction. By appearing to go backwards (or sideways) you are
actually moving forwards.
SALAMI (Piecemeal)
Do not go for everything at once. Go for it piecemeal. Take one slice at a time until you
get the whole salami.
- Negotiations p. 21 -
time. In2 fact, most negotiations end when the parties think they have the best offer they can get.
Settlement is reached when each party believes that they cannot get a better deal without spending
more time, money, and emotional energy than the potential improvement over the current situation is
worth.
WALK AWAY
The classic tactic in third-world markets and is often used here too. If you cannot get the price you want,
walk away from the deal and maybe they will follow you. This tactic is a bluff. To work effectively, you
have to be able to truly walk away from this deal and seek out your BATNA.
- Negotiations p. 22 -
- Negotiations p. 23 -
The fixed-pie assumption reduces our ability to negotiate matters of day-to-day existence as well as those of
international politics. Consider a Friday evening dinner and a movie. You and your date like each other's
company, but you have different tastes in restaurants and movies. Instead of haggling about each issue
separately, see if one of you cares more about the restaurant and the other more about the movie. If you do, you
can work out an integrative trade-off--one picks the restaurant and the other the movie--in which you both get
what is most important to you.
Similarly, while purchasing goods is usually thought of in win-lose terms, another approach is sometimes
possible. For example, a retailer may be willing to cut the price if payment is made in cash--especially, in some
cases, if you don't ask for a receipt or other documentation the IRS might find of interest.
DEHEXING THE WINNER'S CURSE
While on vacation in a foreign country, you spot a very attractive ruby in a jewelry store window. You know
something about rubies, but you are far from being an expert. After some preliminary discussion, you make the
merchant an offer that you think is on the low side. He quickly accepts and the sale is made. How do you feel as
you walk out the door?
If you are like most people in this situation, you find yourself suffering from "the winner's curse," a sinking
feeling that you've been taken. Why else would the merchant have accepted your offer so quickly?
My research with economist William Samuelson suggests that a key factor in the winner's curse is that one
side has much better information than the other. A good negotiator must consider the knowledge and likely
strategy of the other side, but this is hard to do when our opponents know something we don't and can use the
information to selectively accept or reject our offer. This quandary was expressed humorously by Groucho
Marx, when he said he didn't care to belong to any club that would accept him as a member. Its willingness to
take him--to accept his offer--suggested that its standards were so low that the club wasn't worth joining.
Although we are all familiar with the saying, "Let the buyer beware," we seem to have difficulty putting it
into practice. We consistently under-value the importance of looking at a situation from the opponent's
standpoint and getting comparable information before we complete a transaction: a good mechanic's evaluation
of a used car, an inspector's assessment of a house we are considering buying, a jeweler's assessment of a
coveted gem. To protect yourself in negotiations of any sort, you need to develop or borrow the expertise to
balance the quality of information. If you can't get such information before making an offer, askyourself, "Will I
be happy if the offer is accepted quickly?" If not, reconsider your offer.
DE-ESCALATING CONFLICT
The Professional Air Traffic Controllers Organization (PATCO) strikes to obtain a set of concessions from
the government. When the government refuses to meet the demands, PATCO has two options: to back off and
return to work under the old conditions or to continue the strike, despite the threat of dismissal.
Shortly after the strike started, it became clear to objective observers that, faced with an unyielding
administration, PATCO had a weak negotiating position. Rational analysis would have led its leaders to end the
strike or at least reduce their demands before its members were fired. Instead, PATCO acted just as individuals,
organizations and countries so often do in this situation. It increased its commitment to the strike to justify the
earlier decision to proceed with it.
In negotiations, both sides often start with extreme demands, expecting to compromise somewhere in the
middle. But they get caught up in the struggle, feel they have too much time, money and ego invested to back off
- Negotiations p. 24 -
- Negotiations p. 25 -
consistently overconfident of the reasonableness of their position and of the likelihood that an objective third
party will agree with them. In this case, if the arbitrator's assessment of the appropriate wage turns out to be
$550,000 rather than $600,000, the agent's overconfident offer of $775,000 will cost the client hundreds of
thousands of dollars when the arbitrator accepts the team's offer because it is closer to his estimate.
Colleague Margaret Neale and I demonstrated this error in several experiments in which negotiator
overconfidence showed itself in two areas. In simple two-party negotiations, negotiators consistently expected
the other side to concede more than objective analysis would suggest; and under final-offer arbitration,
negotiators overestimated the likelihood that their final offer would be accepted.
For example, while obviously only half of all final offers can be accepted in final-offer arbitration, the
people in our experiments estimated, on the average, a 65 to 68 percent probability that their offer would win
out. This overconfidence reduces the incentive to compromise, while a less optimistic assessment makes a
negotiator more uncertain and thus more likely to compromise further. In our studies, negotiators who were
simply appropriately confident were consistently more willing to compromise and more successful in
negotiations than their overconfident fellows.
Negotiators seem to follow the intuitive rule, "When in doubt, be overconfident." To avoid this, negotiators
should try to obtain objective assessments from outside experts to temper overconfidence and overestimation.
REFRAMING NEGOTIATIONS
You bought your house in 1982 for $60,000. It is now on the market for $109,000, with a real target of
$100,000, which you estimate is the true market value. You receive an offer of $90,000. Does this represent a
$30,000 gain (compared to the original price) or a $10,000 loss (compared to your target price)?
Both answers are correct. But which way you think of the situation strongly affects your attitude toward the
offer. Research by psychologists Daniel Kahneman and Amos Tversky suggests that there are important
differences in how people respond to problems depending on whether they are framed in terms of losses or gains.
In a series of experiments covering situations as diverse as risking lives and risking money, they demonstrated
that if a situation is presented in terms that make it seem like a choice between a small sure gain and a risky
larger gain, most will take the sure thing. But if exactly the same situation is presented in a way that makes it
seem like a choice between a sure smaller loss and a possible larger loss, most prefer to gamble.
Neale and I extended this finding to the area of negotiations when we analyzed this hypothetical situation:
The union claims it needs a raise to $12 an hour and that, considering inflation, anything less would
represent a loss to its members. Management argues that the company can't remain competitive if it pays more
than $10 an hour; anything more would be an unacceptable loss. What will happen if both sides must choose
between settling for $11 an hour (a certain settlement) or going to binding arbitration (a risky settlement, since
both sides must agree to abide by whatever figure the arbitrator decides on)?
If both labor and management continueto view the matter in terms of what they have to lose, they are likely
to choose the risky road of arbitration. But if each side reframes the situation positively--the union seeing
anything above $10 an hour as a gain and management seeing anything under $12 an hour as a gain--then
caution will rule and a negotiated settlement of $11 is more likely.
Neale, Thomas Magliozzi and I confirmed the finding that people who frame the outcomes of negotiation in
terms of gains or profit are more willing to make concessions to obtain the sure outcome available in a
- Negotiations p. 26 -
negotiated settlement. In contrast, negotiators who think in terms of losses or costs are more likely to take the
risk-seeking action of holding out and possibly losing all in an attempt to force further concessions from their
opponent.
Negotiators need to be aware of how framing affects the decision process. If you are evaluating a negotiation
in terms of what you can lose, make sure you also consider what you can gain, and vice versa. Otherwise, your
behavior may reflect the distortion of framing rather than your actual preference for a particular action.
The framing effect also suggests that a negotiator should try to present information in a way that leads the
opposition to see what they have to gain from a risk-free settlement. Finally, when third parties are trying to get
others to compromise, they should strive to frame suggestions in ways that show what both sides will gain from
a settlement.
I have presented these common negotiator errors as separate problems, but clearly they overlap. To mention
just a few examples, negotiators who don't start out with a fixed-pie bias find it easier to avoid escalating
demands and to reframe their thinking and proposals in a positive way. Negotiators who try to understand an
opponent's thinking are less likely to feel overconfident in their judge prior to escalate demands needlessly.
Negotiators who are aware of the tendency to be overconfident in their judgment are more likely to consider
what opponents are thinking and to reframe their perceptions in positive terms.
- Negotiations p. 27 -
- Negotiations p. 28 -
realistic bottom line that you dont forget. In the pawnshop the aspirational sticker price was, typically, double
the amount loaned on clothing and household items; triple the amount for jewelry, musical instruments,
guns, and tools. The bottom line was the amount loaned plus 10%.
Dad needed a code to keep the bottom line secret from others but clear to him and those of us who worked
in the shop. He went back to his fruit peddling days and used the 10-letter code fruitandco, representing,
from the first letter to the last, the numbers one to 10. With fruitandco in our minds, we could count to 10
with 10 separate letters forming a secret digital code.
Each item for sale in the store had a tag with the price written at the top for all to see and at the bottom the
cost plus 10% written with the code fruitandco letters in smaller print. A bottom line amount of $5.70 would
be written tno. All of us who worked in the store knew the code and never lost money on a sale we
would walk away from the deal when we hit the bottom line. But we started every negotiation trying to hit the
goal to come as close to the marked target price as possible, which was profitable but also fair and
reasonable.
Gold Plated Perceptions
In the pawnshop, I learned that deals take place when the offer on the table leaves
everyone better off than no deal. The same is true for settlements of lawsuits. In other words, you dont get
any of what you want unless the other side gets at least some of what it wants. Wants, needs, and values
are matters of perception.
Pawnbrokers and lawyers try to change the other sides perceptions through persuasion that the unredeemed item for sale (or the lawsuit) is worth more and that buying it (or paying the claim) is a good deal.
The person on the other side of the store counter (or the lawsuit) points out flaws, highlights perceived better
alternatives, and argues that the goods or claim is worth less than we think.
Dad was a master at the art of managing perceptions. Behind the counter displaying used watches, he kept
a stack of high-end fashion magazines with glossy advertisements for expensive watches. He would deftly
flip one of these magazines open while a customer was looking at a pawned watch and bring the
customers attention to the price of a new watch that resembled one in the case. (Never mind that the
advertised watch was real gold and ours was gold plated.)
Similarly, a plaintiffs lawyer will be quick to compare the amount of his demand to a large verdict for a
similar claim. The defense lawyer will point out why the current claim is, at best, a plated imitation of the
golden facts that resulted in the big verdict and more similar to a recent case resulting in a defense verdict.
By referring to carefully selected reference points by way of comparison, each negotiator will try to change
the others perception in a way that will result in a sale or settlement agreement.
Do the BABULEW
The best thing that ever happened to boost our sales was when a jewelry store that sold only new
merchandise opened in the neighborhood. Once that store opened, my dad had a tool, even better than
glossy magazine adds, to deal with any customer who wanted too good of a deal. When anyone was
unsure about whether to buy at our shop, Dad would suggest that they visit the jewelry store down the street
and then do the BABULEW which stood for Best Alternative to Buying Used from Lew. The BABULEW
comparison usually closed the sale.
This type of analysis was popularized in the best selling negotiation book, Getting to Yes, which emphasized
the importance of knowing your best alternative to a negotiated agreement (BATNA). Before you decide if
an offer is worth taking, compare what will happen if you dont make a deal. The better your walk-away
alternative, the easier it is to walk away. In lawsuit settlement negotiations, the BATNA is usually mediocre
further delay and costs along with the prospect of a risky trial.
- Negotiations p. 29 -
If you can point out to the other side that their walk-away alternative might not meet their interests as well as
the deal youre offering, they too, might do the BABULEW.
Diamonds for Vacuum Cleaners
My Dad focused on his customers underlying interests rather than just the amount of money they offered.
He didnt get hung up on a customers bravado or the occasional low offer or insulting comment. Customers
used monetary offers to communicate all kinds of things that had little to do with dollars. The same is true
with litigants. Plaintiffs in lawsuits ask almost exclusively for dollars in their complaints and the defense
invariably offers fewer dollars than the plaintiffs demand. But the dollars usually represent basic human
interests. These interests might be met more creatively if better understood.
People need money to satisfy material, social, and emotional needs. Finding out how the money will be
used or what needs must be met is helpful to fashioning a satisfactory agreement. I remember a customer
who brought in a modest diamond wedding ring to pawn. Dad wouldnt give her the amount she wanted
the ring wasnt valuable enough to justify her asking price. Instead of just saying no, Dad asked why she
was pawning the ring and for what she needed the money. She said that she was recently divorced and
needed money to buy a vacuum cleaner for her housecleaning jobs. Dad had lots of unredeemed vacuum
cleaners and a mutually advantageous trade was made. Focusing on needs, not just dollar demands,
facilitated a deal in a situation that did not look promising.
People also have process interests in making deals and resolving differences in a way they consider fair
or, even better, advantageous. Our customers usually thought they did well, were treated with respect, and
had some fun bargaining with the pawnbroker. Dad was a master at making people believe they bargained
him down. He knew the importance of being able to come down from his opening price so that the
customer could get more than a good deal she could get the satisfaction of successfully bargaining for
concessions. Dad knew it was important for customers to leave the shop feeling good not just about the
final price, but about the way they got there. The same is true for lawyers with whom you negotiate.
Give and Take
Concessions are the incremental compromises a negotiator makes after an opening offer. Usually the
concessions made are offered in return for concessions from the other side. Making concessions can be
done strategically, knowing that the timing, amount, and nature of concessions are a form of communication
by which each side sends signals about their values and reservation points. The pattern of concessions
sends a message. By carefully considering what you want to communicate, you can manage concessions to
shape the message, particularly about how close you are to your bottom line. (Diminishing concessions
signal you are close.) Consider the following pattern of concessions and the message my Dad was sending
when selling a watch:
Lew, that old watch isnt worth $100. I will give you $50. Ok, business is slow; I can give you a 10% discount. $90 and its yours.
Its only worth $50.
I can sell you that other watch in the case for $50, because it isnt gold plated. This watch would cost you
$200 new.
You are a good salesman, Lew. Wrap it up and Ill give you $60.
No, I cant do that. Elgin watches are in demand and I dont get them in often. If you want to take it right
now, I will accept $85. Thats it.
I know you are robbing me, but I will pay $75, if you will throw in a new band for it.
The band will cost you $10, so the total will be $95.
Lew, youre going in the wrong direction.
- Negotiations p. 30 -
- Negotiations p. 31 -
Dad told me a story that illustrates the power of an irrational but credible commitment or threat. A man
walked into the pawnshop wanting to pawn a gun. He wanted $50. Dad would normally hold firm not to give
more than $20 on a similar gun. The man explained that he needed $50 to pay his rent, which was past due,
and if he didnt get it he would kill himself. This threat would generally not move my father to part with more
money. However he looked into the mans eyes, which were bloodshot from tears, and saw a commitment
that seemed real. The man got his $50. This may have worked in my Dads shop, but please dont try it in
your next negotiation.
Playing What If
Lew, you cant outshoot me. Yes, I can. No, you cant. Want to put your money where your mouth is?
Why not? Loser pays for all the ammunition. OK.
My Dads pawnshop became well known for offering a staple item in rough and tumble East St. Louis,
unredeemed guns. We also sold ammunition for both personal weapons and hunting guns. Outside, behind
the store, we had a makeshift shooting range. A brick corridor four or five feet wide, formed by the side of
our building and the one next door, terminated in a brick wall, in front of which Dad layered wood and metal
to absorb the bullets. Paper bulls-eye targets were regularly blasted to bits in back of the shop. My Dad was
an excellent marksman.
Dad liked to challenge customers, including police officers who were regulars in the shop, to shooting
matches. The deal was that the customer would pay full price for all the ammunition used, but only if they
lost. Dad promised that if he lost, he would pay for the ammo. Perhaps my memory is colored by the awe I
had for my fathers shooting prowess, but I dont recall Dad ever losing. The ammo sale was based on who
won the shooting match a kind of contingent agreement a commercial bet on an uncertain future
outcome, where each perceives that they are likely to win.
If parties in a negotiation have different predictions about future events or disagreement over the risks that
will flow from concluding a deal or reaching a settlement, they may reach impasse. However, if the
negotiators, like Dad, put their money where their mouths are, they can structure an agreement that builds
upon these differences. In appropriate circumstances, negotiators can agree to disagree and write
contingent outcomes into the deal. When are the appropriate circumstances? When the parties think the
risks are worth taking and they are confident of their shooting abilities.
Exploding Offers
Negotiations are like gas they expand or contract to fill the space or time available. Ive seen many stalled
mediations conclude only when the disputants become aware that the time to make a deal or settle is
running out. Sometimes the deadline is imposed by a court, and sometimes its self imposed, like a plane to
catch. As the end looms, concessions are offered and compromises are reached that would not be
considered earlier.
There comes a time in some negotiations, like in sales, when one negotiator thinks it is advantageous to
prevent the other side from exploring alternatives, getting more information, or having second thoughts. In
these situations, the negotiator may try to impose a deadline. Introducing deadlines into a negotiation is a
way to create a perception of a vanishing opportunity.
In the pawnshop we had to take inventory once a year to calculate merchandise taxes due. But just about
every other week I would hear Dad close a sale late in the day by saying we are getting close to taking
inventory for the merchandise tax. Buy this right now and I will knock off another 10% so I dont have to pay
tax on it. The idea that the discount was fleeting made it especially alluring. (It was true that everyday the
inventory was closer to happening and if sold before then there would be no tax due on that item.) This type
of take-it-or-leave-it deadline is sometimes referred to as an exploding offer. Lawyers do something similar
when they say you have until 5:00 p.m. to accept this settlement offer or its off the table because tomorrow
we start preparing for trial.
A Good Loser
- Negotiations p. 32 -
Never celebrate a victory, at least not in the presence of your opponent. If you can leave the other side
convinced they did well, there will be fewer issues going forward and less likelihood that the other side will
back out of the deal. The relationship between negotiators is strengthened if no one feels they were beaten.
There is value in the rapport established for future negotiations. Conversely, if an opponent or his attorney
loses face, he may feel compelled to get even at the next opportunity.
I will never forget hearing this exchange in the pawnshop at the end of vigorous bargaining between Dad
and a regular customer over the price of an electric fan on a hot summer day:
Glen, you drive a hard bargain. You can take the fan for $17 on one condition; dont tell anyone how little
you paid for it. Im losing my shirt to you.
Stop your bellyaching, Lew. You gotta be making money. How else do you stay in business and feed your
family when you always lose money selling this stuff?
Youre right. I lose money on almost everything I sell, but I sell so much I can afford to lose more money.
Its a matter of volume!
Glen left the shop feeling like he had bargained well. The person you negotiate with should always feel they
got a good deal. A positive experience prevents buyers remorse and may bring them back for more. When
appropriate, congratulate your counterpart on the agreement achieved, but not too much.
Relationships Matter
Pawnbrokers, like lawyers, develop reputations and depend on relationships to succeed. The interest in
creating or preserving a relationship is particularly important when negotiating contracts and resolving
business disputes, where the parties see or once saw a benefit in working together and anticipate future
transactions. In the 1965 Academy Award-nominated movie The Pawnbroker, an old, lonely gentleman
pawned something every week just to have a reason to talk to the pawnbroker.
Some regulars at the pawnshop pawned their jewelry a few days before payday and retrieved it after getting
paid. Musicians would pawn instruments between gigs and come into the shop mid-week because Dad
would let them practice at impromptu jam sessions, which also drew in other customers. The relationship
between my Dad and his band of regulars was good for the soul and good for business. Your relationship
with other lawyers, including opposing counsel, is important for your long term success as a negotiator.
Live and Learn
I cant fully capture here all my Dad taught me about negotiation. There are too many good pawnshop stories and
lessons and too little space in this newsletter. Ive shared a few of my favorites in the hope that you learn something
from my Dad that helps you negotiate better. But I hope you learn something else as well that no matter what your
background, no matter what your parents did for a living, theres a lot to be learned from a life well-lived that can
apply to the resolution of legal disputes. Mine were lessons from a pawnshop, what were yours?
Jay Folberg is Professor Emeritus and former Dean of the University of San Francisco School of Law. He is coauthor of Resolving Disputes: Theory, Practice and Law, Aspen Press, 2005.
- Negotiations p. 33 -
NEGOTIATION GAMBITS
Created by Students in Prior Classes
To make the first offer:
Well, this is how I see it...
Let me tell you what I had in mind.
Why don't we start at...
This is what X would like; what is your position?
After serious contemplation, I have come to this conclusion...
Would you be willing to try this?
Are you open to discussing serious offers?
Would you be open to accepting an offer at this meeting?
I think________is a good offer. What do you think?
If I could offer you______________, what could you offer me?
To get the ball rolling, we think X could offer...
(In your best Brando) I'm going to make you an offer you can't refuse.
I just want to get this resolved, so what if...
If this went to court it would cost us both a great deal of time and money; therefore...
Let's get down to it. What if ....
As a negotiator, when I want them to make the first offer:
We'd like to get this resolved today. What do you need?
How do you see this?
What do you think?
Look, tell me what you need and I'll tell you if we can work something out.
Why don't we just lay our cards out on the table so that we can start sorting out the details. Go ahead, tell me what
you want.
How much are you asking?
What will it take to get you to do____________?
What is your range?
What is your bottom line?
What do you think is a fair proposal?
What are you willing to do to resolve this dispute?
What is your solution?
Could you tell me what you need?
What would it take to preserve this relationship?
What do you think we should do?
Why don't you start us off in the right direction?
Could you fill me in on what you're willing to do here?
What would it take to close this deal right now?
What kind of figure would get you interested?
What is a reasonable starting figure for us today?
To get the ball rolling, how about giving me a ballpark figure?
(In your best Brando) Make me an offer I can't refuse.
I'm open to suggestions.
What do you truly want?
What are you interested in?
As a negotiator, to offer a concession:
We would be willing to pay X for Y.
- Negotiations p. 34 -
- Negotiations p. 35 -
- Negotiations p. 36 -
Are there issues other than what you have already told me?
What were you trying to accomplish when you did________?
That?s interesting; tell me more.
Why are you opposed to that idea?
How will what you are asking for meet your needs?
____________seems to be very important to you. Could you explain why?
Our discussion always seems to come back to?.do you think we could specifically talk about that?
I sense that there might be something else.
Is there another spin to this?
So, how do you feel personally?
How does this sit with you?
What is your opinion?
Can you live with this?
Have you thought through the consequences?
What do you expect by the end of this negotiation?
Can you tell me why you feel that way?
Can you tell me why you think that is more important than_____?
What would be most satisfactory to you, and why?
How do you think I, as a mediator, can help you and your situation?
What are your goals?
Are there other things we should consider?
- Negotiations p. 37 -