5 problems with your opening offer

Occasionally participants ask me about opening offers. Regardless of what the offer is about, we typically make a few mistakes in how we think about opening offers:

  1. Three of the problems are right there in the heading. Let’s start with the first one – opening offer. The language used signals that this is your first offer, but that you expect to give more. Of course you can’t admit this to the other party, because then they will hold out for your next, more favourable (from their perspective) offer.
    So what do you do? You want to maximise your chances of them accepting this first offer so you keep the charade going for a bit. You look the counterparty straight in the eye, and tell him or her that this is the best you can do. In other words, you start the negotiation with a lie!
    And if you lie once, then everything you say is questionable. Bye-bye trust.
  2. Many people will give an offer that involves price or other numbers. Sure, at some point we may need to discuss numbers. But once numbers are on the table negotiations predictably degenerate into a bargaining game with little to no value creation potential. Yes, the game can be turned around. But that will require a more skilful negotiator, and that skilled negotiator is unlikely to have started with a number in the first place.
    So what do we discuss if we don’t discuss numbers? We discuss how to arrive at those numbers. This conversation has greater scope for finding agreement, creating value, and for persuading parties.
  3. One common reason for opening with a number is to take advantage of anchoring. When we don’t have a reference point as to what is a fair or correct number (e.g. the price for a new or unique product), we are disproportionally influenced by (anchored to) the first number we hear. So negotiators have an incentive to open with aggressive opening offers. While we don’t necessarily accept the anchor we hear as fair, it does work like a strong gravity field and influences our expectations of where the negotiation will end up.
    But… While anchoring is very effective for claiming value from completely unskilled negotiators, it is such a common tactic that even average negotiators are familiar with it. And they will resent you for trying to manipulate them.
  4. By the way, why are we calling it an opening offer? Why are we offering anything? Discussing offers signal a fundamental misunderstanding of negotiation. It’s not about give and take. We’re in the business of finding ways to get all parties what they want. Assuming that parties have to give, concede or offer things leads parties into a zero-sum bargaining process where little or no value is created.
    Why not use “option”, “suggestion” or “idea” instead of “offer”. Indeed, why not!
  5. And why open with an offer. How can you possibly expect to come up with the perfect offer straight out of the box? The offer (or option, suggestion, idea or solution) is supposed to satisfy parties needs, thus we first have to discover what those needs are! And to do so effectively typically relies on first having negotiated a process and pattern of communication that parties agree to follow. And the success of achieving that is in turn strongly influenced by relational aspects such as rapport and trust among parties.
    In other words, there are many, many things negotiators do before putting an offer (or option, suggestion…) on the table.

Accelerate to master negotiator in one hit

“What kind of person would you say that you are – specifically, how do you treat others?” When I ask my course participants I typically learn that they are respectful, caring, emotionally balanced, objective and rational individuals who value relationships and are very capable of seeing things form other people’s perspectives.

Then I ask the same group of participants if they have ever experienced road rage. A sea of hands gets raised… rather tentatively 🙂 I then ask the same participants to jot down the exact words they had used in their past road rage episodes. And if I’m having a particularly fun day in class – at my participant’s expense of course 😉 – I may ask one or two of the participants to re-enact their experience in front of everyone… verbatim!

This usually causes quite a bit of embarrassment and cognitive dissonance. On the one hand we view ourselves as “good towards others”, and yet we behave “horribly towards others” in certain situations. What’s the go?

Relationship is the go. They key distinguishing feature of your interactions with others in traffic is that the other party is anonymous, you are anonymous, and you expect to never interact with this person again. Everything you know and feel about this person is distorted by one… single… action. There is no past, present or future relationship. Specifically, you don’t expect this person to play any role in your future.

This concept translates directly to negotiation. When parties envisage a joint future – a future in which they will each derive value from working together – parties have a strong incentive to be on their best behavior. Incidentally, this paves the way for self-fulfilling prophecies – being on our best behavior ensures the highest likelihood that we will realize the mutually beneficial outcomes we set out to achieve in the first place.

But what happens the moment one or both parties decide that they wish to cease the relationship permanently and walk their separate ways? In an instant parties change from looking for solutions that work for both (or all), and revert to just looking out for themselves – numero uno. The other party immediately becomes unimportant. And we demonstrate this in the way we negotiate with him or her…

The strength of the relationship between parties has a predictable effect on how easy it will be to influence each other, how pleasant the process will be, and how much value can be unlocked or created. This is why I have developed one piece of homework for any aspiring negotiator who doesn’t have the patience to learn all the other insights. And here it is:

Identify the most difficult person in your life, who dislikes you the most, or is the least cooperative…. And make him or her like you.

That’s it. And if you succeed, then I will happily refer to you as a master negotiator, because you can apply the same proven rapport, trust and relationship building skills to improve every single interaction (negotiation!) you have with any person.

Beware of the status negotiation

(This is a repost from Filip’s original blog)

In my upcoming book I discuss the idea that every negotiation (and interaction!) we have is actually made up of multiple parallel negotiations.

When I ask you ”What was that last negotiation about?”, the answer you give me will probably be what we call the formal topic of the negotiation. Now, if this were the only negotiation we needed to pay attention to then life would be very easy.

But human interaction is much more complex than that. Our formal topic will be polluted by a range of covert negotiations (or competitions!) about status, perceptions, intentions, understanding, trust, rapport, fairness, values, beliefs, and so on.

So let’s today look at one of these; the status negotiation. We all want status and recognition. But we make two flawed assumptions that often make the status negotiation impossible to resolve. One assumption is that we should have most status. The other is that we assume there is only one source of status.

The pattern can look something like this:

  • Person A: “I have 20 years experience in this area, so I know what I’m talking about.” (i.e.”I’m right because of my status!” )
  • Person B: “Well I have education, so I understand this in much more detail than a simple practitioner.”
  • Person C: “I have the most senior title, so the organisation has decided that my view is most important.”
  • Person D: “Yes, but I’m much older than all of you, and have life experience that you can’t begin understand.”
  • Person E: “You are all wrong. I’m clearly the most intelligent person in the room, so my view is obviously the most important.”
  • Persons A, B, C, D in unison: “No, I’m the most intelligent person in the room!”

Do our negotiations really look like this? YES… they do! But not on the surface. All of this goes on behind the scenes. Still, the results are readily visible, and with focused attention we can pick up on the signals in time.

Each party that does not feel that their status is acknowledged will resent the others. Left unresolved, this unmet need will predictably pollute the rest of the negotiation or interaction. It is not uncommon for a failed status negotiation to cause an otherwise successful negotiation to derail.

So what can we do instead? How about we deal with those flawed assumptions! Let’s first appreciate that there are countless sources of status. The more sources we have, the more flexibility we have to let the other party also get their status needs met. We need to take responsibility for this. Because if we put all our eggs in one basket and only rely on a single source of status (e.g. our title or rank) then our ego will do everything it can to protect that source of status. And we already know that having a sensitive ego is incompatible with being a skilled influencer or negotiator.

Let’s also acknowledge that the goal is not to feel appreciated at the expense of the other party. Rather the goal is to feel sufficiently appreciated. There is no competition here, so stop competing!

Let’s try this out:

“So you (Person B) have a PhD? Fantastic! I’m sure that your education together with my (Person A) experience in this area will enable us to arrive at even better outcomes than those we could each have achieved individually!”

Now wasn’t that the easiest thing in the world…?