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More Hard Bargaining Tactics

July 29, 2013 at 1:40 PM

The 22 January 2010 issue of NZLawyer contained an article by me on the 10 hard bargaining tactics most often encountered by business people ("Hard bargaining tactics ... and how to deal with them", issue 128). Here are 10 more negotiation tactics.

Even if you have qualms about using these tactics yourself, awareness of them enables you to defend yourself from them.
Many negotiation tactics involve elements of deviousness and deception. The ones described below are no exception. I view these tactics as ethically neutral. It is in their execution that ethical issues may arise. For example, lies about facts are in my view unacceptable, but adopting tactical bargaining positions and using hyperbole are acceptable. At what point, however, do explanation of position and excessive hyperbole change character and amount to dishonesty?
By way of further example, there is no general obligation to correct incorrect assumptions being made by the other party which favour you and disadvantage them. But to what extent is it ethically permissible to create those incorrect assumptions yourself?
Negotiators are well advised to choose their words carefully, if they are to meet their desired ethical standards. Negotiation is full of many fine lines.

1. Misleading concession pattern

I have chosen this tactic first, because of its power and elegance.
The pattern of concessions made by a party during the course of negotiations can suggest how that party is ultimately prepared to settle.
A tactical party may therefore deliberately orchestrate a series of concessions which suggest to the other party that it is prepared to compromise less than it in fact is.
By way of example, assume that a plaintiff's undisclosed bottom line in a $1 million claim is $600,000 and that the defendant would be prepared to settle for that amount. If the plaintiff's settlement offers during the course of the negotiations were $900,000, $700,000, $650,000, and $625,000, then such a pattern would correctly suggest to the defendant that the plaintiff would be prepared to settle for $600,000.
The defendant will not therefore entertain a settlement for anything higher than $600,000. This means that the plaintiff will have to settle at its bottom line.
But the plaintiff could do better than that. It could instead propose to settle for $900,000, $800,000, $750,000, and $725,000. This suggests to the defendant that the plaintiff's bottom line is $700,000. The defendant may reluctantly agree to settle for this amount in the mistaken belief that the plaintiff will compromise no further. The plaintiff has achieved a settlement $100,000 better than its bottom line.

2. Splitting the difference

This tactic demands mention, because it is arguably the most common of all. It involves a party proposing to settle on a figure exactly midway between the parties' last offers.
The tactic appeals to fairness, and can be useful in bridging the last gap between the parties. It is often therefore a benign and constructive tactic.
But the wily tactician may use the tactic to derive one-sided advantage.
The fairness of the tactic depends on whether both parties have made appropriate concessions in the first place. The tactical party will suggest splitting the difference if the other party has made greater concessions than it has.
Furthermore, splitting the difference can be used by the tactical party to achieve a late bonus. If, for example, the parties are at $950,000 and $875,000 respectively, and the tactical plaintiff party unbeknownst to the defendant party is prepared to accept the defendant's offer of $875,000, then splitting the difference will result in a settlement of $910,250, which gives the plaintiff party $37,500 more than it was prepared to settle for.

3. Bracketing

It is important to mention this tactic, because it anticipates the likelihood of splitting the difference.
The tactical party pitches its offers in such a way so as to take advantage of a subsequent splitting the difference. It calculates the difference the other party is from its (the tactical party's) settlement goal, and sets its next offer by adding or subtracting that difference from its goal, depending on whether it is payer or payee.
If, for example, the other party is the plaintiff and has offered to settle for $500,000, and the tactical defendant party wants to settle for $400,000, a difference of $100,000, then the tactical party should offer $300,000, because if the parties ultimately split the resulting difference of $200,000, the end result would be $400,000.
Or by way of further example, if the tactical party is the plaintiff and wants to settle for $1.5 million, but the defendant party is only offering $1.1 million, a difference of $0.4 million, the tactical party should offer to settle for $1.9 million, because if the parties ultimately evenly split the difference of $0.8 million, the tactical party will achieve its goal of settling for $1.5 million.

4. Extreme demand – small demand

I mention this tactic, because it is a useful variation of the tactic of extreme first offer.
I discussed the latter tactic, which seeks to exploit the phenomenon of anchoring, in my previous article. The tactic of extreme first offer inevitably leads to a long process of incremental bargaining, and carries the risk that one party may give up in disgust or out of exhaustion.
The tactic of extreme demand-small demand avoids these risks, and serves to conceal the true objective of the tactical party.
Two demands are made, one unreasonable, the other reasonable. The tactical party makes an extreme demand, knowing it will be refused, combined with a relatively benign demand which appears attractive by comparison with the other. It would be churlish or unwise for the other party not to accept this smaller demand, which was all the tactical party wanted to achieve in the first place.
In an employment dispute, for example, an employee might demand one year's loss of salary and the much more modest costs associated with relocation to new employment, aiming to achieve the latter but not expecting to achieve the former. Or in a relationship property dispute, a party might claim a substantial interest in one asset, and a modest interest in another, not expecting the former claim to succeed, but hoping for the latter to succeed.
This tactic, like that of extreme first demand, exploits the psychological phenomenon of anchoring, whereby an unrealistic figure becomes a point of reference. Irrational as it might be, the non-tactical party will use the unrealistic offer as a guide to evaluate the other offer.

5. False demand – false concession

This tactic is sometimes called the Brer Rabbit tactic, because is utilises the same reverse psychology used by Brer Rabbit to escape the fox, in that case by pleading not to be thrown into the patch of briar from which it could elude the fox.
If you ask for the opposite of what you really want, your opponent may spitefully refuse and
instead give you what the opponent thinks you don't want, which is really what you want.
The tactical party misleads the other party as to its true objective by arguing for something it does not really want. It convinces the other party that an issue is very important to it, when in fact it is not.
The tactical party then says that it will 'reluctantly' forego this claim, and 'reluctantly' agree by way of concession to an alternative outcome. The false concession is in fact the true objective, for example:

  • "By far the most important thing for me is to keep the matrimonial home [false demand], but if you force me, I will have no option but to reluctantly agree to its sale" [false concession, true objective].
  • "Our priority is a right of way over your land [false demand], but as a second best would agree to buy your land" [false concession, true objective].
  • "We demand that you increase the pay of our union members [false demand]. In order to avert strike action however, we might reluctantly agree to better working conditions [false concession, true objective]."

6. Reverse false concession

This is a variant of the last mentioned tactic. The previous tactic involves the tactical party falsely asserting the significance of one of its issues.
In this tactic, the tactical party inflates the significance of an issue which is important to the other party, but which is not important to itself. The tactical party then 'magnanimously' concedes this issue, but asks in return for an equally magnanimous concession from the other side:

  • "Although the issue of the length of the proposed lease is very important to us both [false], we are prepared to accede on that point, provided you are equally generous and agree to reduce the proposed rent [true objective]."
  • "Like you, we consider that the location of the car park in the proposed development is crucial [false], but we will generously concede the issue provided that you are equally generous and agree to reduce the number of parking spaces [true objective]."

7. Consecutive alternative demands

This tactic is a variant of the previous three. All three previous tactics involve the tactical party concealing the settlement outcome it favours or expects. Like the three previous tactics, this one involves alternative possible outcomes, but in this case both outcomes are acceptable to the tactical party, and so there is no deception.
The tactical party puts two proposals on the basis that the other party must choose one. Giving the other party a choice enhances the prospects that at least one proposal will be chosen:

  • "You can either give us half the shares, or keep them all yourself and pay us $X. You choose."
  • "We give you two options. Either you allow us to undertake the remedial work, or we will pay you $X towards your engaging another firm to do so." "I want either a pay increase of $5,000 per annum or an extra week of paid leave."

8. Reinforcement and reward

This tactic appeals to me because it reminds me of my psychology lectures at university. More to the point, it works. Psychological forces at play in negotiation tend to be potent, and often go undetected.
The tactic utilises the principles of operant conditioning. Humans, as much as rats and pigeons, will pursue a course of conduct if previously rewarded for it, despite the rewards no longer being available.
Here the tactical party responds to the concessions of the other party in an overly generous way. The other party then goes on making concessions, believing the tactical party will continue to respond generously, even after the tactical party stops responding generously.
The other party has been lulled into erroneously thinking that it should continue making concessions, because such generosity will continue to be reciprocated by the tactical party.
The tactic is in essence to generously reciprocate the opposing party's concessions early, rather than leave generosity for later. The early generosity will continue to pay dividends even after the generosity has ceased.
Also underlying this tactic is the powerful psychological phenomenon of reciprocity, by which people who receive a gift or favours like to offer something in return, often of greater value to that first given.

9. Salami

This tactic works on the principle that it is better to make many small demands than a few big demands.
The salami may be regarded as comprising all the benefits or value about which the parties are negotiating. A party can get away with most of the salami so long as they are not seen to demand an overly generous slice at any one time.
An incessant series of small demands is made, each of which in itself appears tolerable to the other party, and hence is agreed to. But the demands collectively add up to something considerable. The tactical party surreptitiously achieves all that it wants, before the other party realises it has conceded too much.
The tactic can also be used defensively in an opposite way. This time, view the salami as comprising all the possible compromises available to the tactical party. The tactical party makes many minor compromises which are of little value, but which use up all of the salami. The tactical party thus declares it is unable to compromise further, because it has compromised on all available issues. It asserts, therefore, that all future compromises in the negotiations must come from the other party or parties.

10. Escalation

Most of the previous tactics are subtle. This final tactic is plain aggressive.
The tactic involves raising demands during the course of the negotiations, contrary to the usual expectation that demands will be lowered as the negotiations progress. ❯ "Although we were earlier offering to accept payment from you of $800,000, we have looked at the figures again, and are now only prepared to settle for $900,000."
In this example, the other party, the defendant, which was hoping to whittle the earlier mentioned figure of $800,000 down to $700,000, is now faced with whittling down $900,000. The best the party might expect to whittle it down to is around $800,000, which unbeknownst to the defendant is the figure the tactical plaintiff party was aiming to settle for all along.
Escalation can thus be seen as a pre-emptive strike to protect a preferred settlement figure from being pared back by ongoing incremental bargaining. But the tactic is more than a protective one. It is also used to bully the other party into settlement by signalling that its patience and goodwill are wearing thin.
And it is used to unsettle the other party by the unexpected change in the direction and tone of the negotiations. This serves to undermine the confidence of the other party in predicting how the negotiation might conclude. That in turn reduces the willingness of the other party to pursue a hard line in the negotiations.

For more information, see Articles and Presentations at www.nigeldunlop.co.nz, and issue 128 in the Archives at www.nzlawyermagazine.co.nz. Nigel Dunlop is an Auckland barrister who has mediated over 500 disputes of all descriptions throughout New Zealand, involving more than 2,500 hours of mediation, achieving a documented 93 per cent settlement rate.

NZLawyer \ 13 July 2012 www.nzlawyermagazine.co.nz

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Category: Negotiation