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.
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    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!
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    And if you lie once, then everything you say is questionable. Bye-bye trust.
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  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.
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    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.
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  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.
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    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.
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  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.
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    Why not use “option”, “suggestion” or “idea” instead of “offer”. Indeed, why not!
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  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.
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    In other words, there are many, many things negotiators do before putting an offer (or option, suggestion…) on the table.

Do better than win/win

It is Tuesday morning, and I complement my negotiation coaching session with the soothing and tranquil soundtrack of a high-powered leaf blower in the background.

I peek outside the window, and see the building maintenance guy vigorously chasing an ever moving mountain of leaves. When I later leave (badum-tish!) for lunch I can’t help but notice how pristinely spotless the property looks. Well done Mr Leafblowerman! Certainly a win/win transaction, right?

Yes, but that’s not good enough. Let me explain.

On Wednesday mornings I again enjoy the soundtrack of a leaf blower, but the relaxing acoustics sound slightly different as they now originate from the building next door. I again glance out the window, and see Mrs Leafblowerwoman standing in a cloud of dust and leaves. She has managed to lift everything off the ground, and is now patiently waiting for it all to settle… on our side of the fence.

HEY WAIT A SECOND!! She is doing exactly what our guy is doing. And if we had a win/win negotiation with him, then surely our neighbours have win/win negotiating with her? But I’m certainly less excited about their deal – particularly as my car is now covered with dust and leaves. How could this possibly be a win/win?

Here’s what’s going on – we are using too simplified labels to describe negotiation. In our book we deal with this by describing four negotiation dynamics.

  • The first one is about dividing value, or transferring value (or problems!) from one party to another. This usually results in win/lose outcomes.
  • The second focuses on ensuring that value is increased for both parties. However, it is important to realise that sometimes this value is not created, but rather transferred from other parties who are not part of our negotiation! Thus a win/win deal between two parties may still be a win/lose deal between this group and other parties!

If value is merely transferred in the system, then value is not created, and therefore our actions are zero-sum – if someone wins, then someone, somewhere, loses.

We can contrast this with a sustainable approach to negotiation, which is focused on creating and maximising value in the system. In the book we refer to this as maximisation, and boy is it powerful. And it doesn’t have to be difficult. In our leaf blower example, if Mr and Mrs Leafblowerperson instead pick up the leaves and put them in the bin, then the leaves (i.e. the problem) would be removed from the system, as opposed to being perpetually passed around.

How our favourite thing ruins our negotiations

In the following piece, comedian Louis CK inadvertently – but beautifully – captures one of the key insights for why negotiations go off track:

So what is the insight? Our tendency to self-servingly pursue our favourite thing at the expense of everyone else.

We would certainly hope that the individual who Louis CK describes belongs to the minority in our society. The bad news is that when we look at a large sample of negotiations we discover that this exact behaviour is pervasive in negotiation. Unskilled negotiators consistently:

  • come up with one desired outcome;
  • pay exactly zero attention to what the other party or other people want;
  • pay exactly zero attention to how pursuing that outcome will effect the other party or other people; and
  • are inflexible and uninterested in compromising on what we want. Or as Louis CK summarizes it – we don’t want to settle for outcomes that only meet 99% of our criteria.

Starting negotiations in this manner predictably leads to the first of the four games that we cover in Negotiation Evolved. This is the game that has the lowest potential for creating value, and the highest risk of producing negative by-products.

Quite disturbingly – this is also the game that we observe in the vast majority of negotiations…

Overcoming negativity, resistance and objections

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

So you are trying to influence someone. You are pretty certain that you have come up with an option or a solution that is in the other party’s interest (and of course, also in your interest!). Maybe this is to get her to enrol in a course, sell his motorbike, take a vacation or accept your business proposal. But for some reason he or she is on a repetitive loop of insisting on problems with your solution.

Whether you just want to help, or you want to influence out of self interest, this pattern of negativity can be frustrating to deal with.

Building on my previous blog entry, where I said negotiation and motivation rely on the same insights, we can recognise that we are either motivated to move towards a goal, or away from some undesirable outcome. How did we try to influence our friend above? That’s right, we sought to create an attractive goal for him or her to move towards.

So how about we change tact and instead help the other party understand why he or she at least wants to move away from the status quo. This can be achieved by merely letting the other party think through and verbalise to us how the future might pan out if he or she doesn’t take our desired action.

“I understand that you have hesitation with aspects of the option that I suggested. Can I just ask, how would you weigh the risks and responsibilities of taking action against the risks and responsibilities of not taking action…?”

Here the other party can realise for him/herself that he/she can’t get his/her desired career without attending that course, or might get seriously injured on their motorbike, might get more depressed or stressed from not taking a break from work, or will miss out on the tremendous value that your business proposal would enable.

Once we get the other party to accept that the present path they are on is undesirable, then they will realize that they have to change. This is p o w e r f u l. At this point their thinking changes from looking at problems with our suggestions, to actually looking for solutions themselves. And as I mention in my bookif the other party is looking for solutions – let them!