The Intelligent Negotiator (7 page)

Felicia plans to mention her anticipated moving expenses and the possibility of a company car to induce Andersen to make concessions on other items. If they indicate a willingness to give her several thousand dollars in moving expenses, she plans to request a “signing bonus” instead. She knows that Bill’s agency would not reimburse him for any moving expenses covered by Andersen, but would make no similar deduction for a signing bonus given to her. Andersen should not mind how such a payment is characterized, since the cost to them would be the same in either case.

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Intelligent Negotiators appreciate the importance of opening offers. That’s why they plan ahead and use effective bargaining techniques such as the ones discussed below.

Use the Bracketing Phenomenon to Your Advantage

A bargaining phenomenon known as
bracketing
works as follows: Once an offer is made, bargainers tend to move toward the midpoint between their opening positions. Good bargainers try to establish initial offers that, when averaged with the anticipated offers of opponents, will provide the desired objectives. The “bracketing” phenomenon explains why most negotiators prefer to have counterparts announce their beginning positions first. Once your opponents have made an opening offer, you can adjust your initial proposals to keep your goals near the center of your respective opening offers. For example, you hope to obtain $75,000. Your counterpart begins with a $68,000 offer, so you respond with an $82,000 demand. If the parties make equal concessions thereafter, you will achieve your $75,000 objective. If you are making the opening offer: Try to estimate where your opponents will begin the encounter, then select a beginning position that would most likely result in final terms favorable to yourself.

Give Yourself Some Bargaining Room

Many inexperienced negotiators are afraid to offer elevated opening bids that might offend their opponents. As
a result, they begin with position statements that are not particularly generous to themselves, and they obtain below average settlement results. This is a mistake. Intelligent Negotiators usually attempt to develop the most extreme opening positions that they can
rationally defend.
Remember that
indefensible
positions will cause an immediate loss of credibility, and appreciate the degree to which you may elevate your claims in a defensible manner if you carefully prepare the arguments necessary to support your proposals. When in doubt, begin with inflated positions that provide you with room for movement once the serious discussions begin.

There are several reasons to start high. It is impossible for anyone, even the most highly skilled bargainers among us, to accurately calculate the true value of impending interactions solely from our own perspective. Until you begin to interact with your counterparts, you have no idea how much they want the prospective deal. You don’t know how risk-averse or risk-taking those persons may be. Your counterparts might be risk-averse people who feel compelled to achieve agreements, in which case they may be willing to accept less beneficial terms. On the other hand, if your counterparts are risk-takers who are willing to accept the consequences associated with non-settlements, you may have to moderate your aspirations. Open discussions with a heightened position statement so you can preserve your options until you are able to determine whether your preliminary assessments are accurate.

Consider the Impact of Anchoring

Some of us prefer to begin bargaining encounters with modest proposals in the hope that we will generate reciprocal
behavior by our opponents. However, such behavior is likely to have the opposite effect. For example, you go to a car dealer to purchase a new vehicle. If the salesperson begins the serious discussions by emphasizing the $22,500 manufacturer’s suggested retail price (MSRP), you may be pleased with a $21,500 deal, elated that you obtained a $1,000 price reduction. On the other hand, if the salesperson begins with the $21,500 figure, you would feel the need to achieve a price below that level. If the salesperson refused to go much below $21,500, you may walk out and try to get a better deal elsewhere.
Anchoring
explains why, when we receive opening offers that are more generous than anticipated, we first question our own preliminary evaluations and then begin to think we will do better than we hoped.

Negotiators who begin with less generous preliminary offers have the opposite anchoring impact. You induce opponents to think they will be unable to do as well as they had anticipated, causing them to lower their expectation levels. This phenomenon increases the probability of final settlements and enhances the likelihood you will achieve beneficial terms for yourself.

Several months ago, I flew back to Reagan National Airport from an out-of-town speaking engagement. I took a taxi home to my Georgetown residence. We don’t have metered cabs, but use an incomprehensible zone system to determine taxi fares. The fare for my Reagan National trip home usually costs between $14 and $16, plus tip. On this occasion, the driver demanded $26! I laughed, and said his demand set an all-time record. He then demanded $21. I handed him a $20 bill and suggested he call the police if he expected a higher fare. He accepted my $20 bill and departed. Nonetheless, because of his outrageous opening demand of $26, he got the highest
amount I have ever paid for that ride. The “anchoring” effect of his $26 demand made me feel lucky to get out of the cab for only $20. Had he been more honest with his initial demand, he would only have received $16 or $18.

Bear in Mind the Impact of Gain-Loss Framing

Another layer to consider when making your opening bid is
gain-loss framing.
Studies by experts like Daniel Kahneman and Amos Tversky have demonstrated the impact of this phenomenon.
²
People behave differently when considering
sure gains
or
sure losses.
Those deciding whether to accept a certain gain or the possibility of a greater gain or no gain tend to be risk-averse. They usually accept the certain gain. A perfect example is the television show “Who Wants to Be a Millionaire?” When contestants get to the $64,000 or $125,000 level and are contemplating a question at the next higher level, they only provide an answer when they are quite sure it is correct. They would rather keep the certain $64,000 or $125,000 than risk a fall-back to the $32,000 level. On the other hand, people facing a certain loss or the possibility of a greater loss or no loss tend to be risk-takers—hoping to avoid any loss. When you prepare your opening offer, try to frame what you are offering as “gain” for your counterparts, as this will make them more risk-averse. Even when it appears that your opponents must lose money, point out how much they will “gain” by achieving a peaceful resolution of the present conflict. For instance, if an antiques dealer asks $400 for a vintage rocking chair, you should frame your opening offer of $250 as a sure gain (as you have the cash now and have bought similar pieces for less money).
If you do this, the dealer is more likely to see your offer as an opportunity and consider it fully.

Prepare Principled Opening Offers

When adroit negotiators prepare for bargaining interactions, they try to develop principled explanations they can use to support the particular positions they are articulating. For example, instead of simply offering $21,500 for a specific vehicle with certain options, they note the basic dealer cost of $19,000, the $1,000 dealer cost for the luxury package, and the $500 dealer cost for the enhanced sound system. Prospective home-buyers making an initial offer for a house would note the recent selling prices for similar homes in the same geographical area. They would mention the comparable homes that sold for less, rather than the homes that sold for more, leaving it to the selling agent to note the higher priced transactions. If the selling agent fails to point out the higher priced houses, he or she may undermine the chance of obtaining a higher price for this home.

Providing a careful explanation for your initial position accomplishes two objectives: It explains why you are offering your initial terms instead of more generous terms. It also begins to undermine opponents’ confidence in their own positions. If your adversaries can be induced to question the propriety of their preliminary evaluations, they are likely to move in your direction.

When negotiating with family members, close friends, or business partners, you will find it difficult to begin with positions as extreme as those you might use with strangers in commercial settings. It still behooves you to begin with offers that provide some bargaining room and that will,
through anchoring, moderate the other’s expectations. If you start with offers that are overly generous, your spouses, children, friends, or business associates will be likely to raise their expectation levels in a way that will make the attainment of mutually acceptable resolutions more difficult.

From the position announcement indicating that Andersen planned to pay “up to $60,000” for the network manager position, Felicia anticipates that the vice-president will begin discussions with a $55,000 to $57,000 offer. She wisely recognizes that almost all employers initially offer less than they are willing to pay, hoping to hire new workers for less than necessary. They expect knowledgeable job candidates to make counteroffers, and wish to provide themselves with room to make needed concessions. Job applicants who fail to appreciate this fact and accept the terms initially tendered forego the more beneficial terms they could have obtained through the bargaining process.

Felicia originally planned to ask Andersen for a $65,000 salary, but appreciates the bargaining leverage the tight labor market affords her. If the vice president offers her $55,000, she decides to politely note the $70,000 and more being earned by network managers at firms that are only slightly larger than Andersen. By inducing the Andersen vice president to think in this exalted range, Felicia believes that he would be likely to move quickly to $60,000—and may even contemplate a higher figure. This approach should certainly get Felicia past her $60,000 bottom line, and near her $63,000 to $64,000 target.

Felicia plans to request four weeks vacation, reimbursement for her moving expenses, firm payment for the training courses she wants to take, a modest “signing bonus,” and a company car. She plans to concede the moving expenses and company car quickly, in exchange for the other items she desires more. These concessions would make the vice president feel relieved when he only has to give her the signing bonus and course payments.

C
HOREOGRAPHING
I
MPENDING
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NTERACTIONS

Plan ahead. Think about how you will induce your opponents to move from their opening positions to where you want them to end up. You want to choreograph the impending interaction in a manner that enhances the probability that you will obtain the terms you wish to get. Following the presentation of opening positions, do you envision a few large concessions or a series of smaller concessions? Which of the different bargaining techniques (featured in
chapter 8
) do you plan to use to move the opponents in your direction? The more you envision being successful, the more likely you are to achieve your ultimate objectives. Since your adversaries may not behave exactly as you anticipated, you must retain sufficient flexibility to counteract unexpected opponent conduct.

Plan When and Where to Negotiate

Don’t be so concerned about the substantive aspects of your upcoming bargaining encounter that you fail to consider the
contextual factors
—the time, date, and setting for the discussions. These essential factors frame the negotiation.
Skilled negotiators sometimes permit the other party to choose the location in order to demonstrate their good faith and to create more cooperative environments. Most people feel more comfortable in familiar surroundings and prefer, whenever possible, to negotiate in their own homes or offices. However, when dealing with retail establishments, the salespeople generally control the negotiating environments. Prospective buyers must normally go to the retail stores, car dealerships, or real estate offices involved.

If the discussions are to occur in a location that you select, how do you plan to arrange the furniture? If there is a square or rectangular table in the room, angry adversaries are likely to take seats on opposite sides of the table. This confrontational configuration heightens the anxiety level and lessens the possibility of a pleasant interaction. If you can select a round or oval table and have the participants sit adjacent to one another around the table, this more cooperative setting should enhance the talks. Even if a square or rectangular table is used, seating the participants on adjacent sides, instead of directly across from one another, can similarly enhance the bargaining environment. If a sofa is available, you can create a cooperative situation by having the parties sit next to one another.

If you go to the other side’s office and feel uncomfortable as soon as you enter the negotiating space, look around and ask yourself whether this person has deliberately set the room up to make
you
feel uncomfortable. Has he or she sat in a raised chair and given you a short, uncomfortable chair? Has he or she taken up most of the space with his or her own desk and chair, forcing you to sit in a chair with your back against the wall to place you on the defensive?

Some adversaries may place your chair in a place where you will have bright sunlight in your eyes! A few unscrupulous car dealers or real estate agents place hidden microphones in the room so they can listen to your conversations with your spouse or partner when you think you are conferring confidentially. If you ever encounter such opponents, remember one thing: They are viciously competitive individuals who will do whatever it takes to defeat you. Be on your guard, and don’t hesitate to use the “attitudinal bargaining” discussed in
chapter 3
to moderate their offensive behavior. If you suspect that your opponents are eavesdropping on your side’s private conversations, plan what you will say ahead of time to limit what your adversaries may hear. You can then communicate silently with hand gestures or on paper when necessary to prevent discovery by unscrupulous opponents.