Agreement via Concessions and Reciprocity - dummies

Agreement via Concessions and Reciprocity

You may think your parties will never, ever agree. But consider this golden truth of human nature: When one person freely gives another something of value — time, information, goods, or, in negotiations, concessions — the recipient inevitably feels an obligation to reciprocate or, more commonly, over-reciprocate. Studies show that restaurant waiters who bring candy with the check receive dramatically larger tips, the difference being far greater than the candy’s worth.

Your clients’ satisfaction with the settlement and your performance depends on something other than the absolute dollar value. In fact, social scientists have discovered that people tend to be more satisfied with the outcome of negotiations in which the other side makes numerous concessions, even if they’re small or inconsequential.

Tap the overwhelming human urge to reciprocate as a method of breaking through impasse. Whenever a party makes a concession, acknowledge it and stress how difficult it was for the conceding party to make it.

Then, strongly suggest that the other party reciprocate. You may say something along the lines of, “If so-and-so is willing to make this concession, he’s going to expect you to make similar concessions in return.” Additionally, use the following two concession-centric techniques to break through impasse and leave everyone feeling like a winner.

Call a bluff with a contingent concession

Negotiations will screech to a halt if one or both parties are bluffing, wildly exaggerating a claim, or overly concerned about how future events may affect their bottom line. Break through this kind of impasse by suggesting a contingent concession — one party promises something on the condition that a specific future event does or doesn’t occur.

As an example, in an action between two partners over the value of the partnership, one party insisted that the inventory was worth “virtually nothing” while the other argued that it was worth $150,000.

The mediator asked the party who asserted the worthlessness of the inventory to include in his counteroffer an agreement to throw the inventory in gratis (free) in the event that a planned appraisal valued it at no more than half the value his soon-to-be former partner claimed it to have.

If the parties had agreed to such a contingency, the partner who valued the inventory at $150,000 would receive its full value as a reward for accurately appraising it. The other partner would have hedged his bet that the property was worthless, receiving a portion of its value only if it was worth $75,000 more than he predicted.

Neither party accepted the mediator’s proposal. They backed down on their previous estimates of the inventory’s value. After several more rounds of offers and counters, they agreed that the inventory was worth at least $100,000, adding that value to the buyout price they eventually negotiated to settle the litigation.

Had the parties stuck to their guns on their differing inventory valuations, the negotiation would have been ripe for logrolling.

Negotiate concessions with logrolling

Logrolling is a technique that takes advantage of differences between the parties, including differences in cost or valuation, predictions about the future, or the parties’ appetite for risk. To logroll, ask diagnostic questions to reveal what’s underneath each demand and the true cost of satisfying that demand. Ideally, you’re looking for exchanges in which one party gives up something of low cost that has a high value for the other party.

Logrolling can come in handy on a daily basis. One mediator used it to negotiate dissatisfaction over his own hotel stay. The hotel was new and the phone reception scratchy. Construction was going on outside his window, interfering with an important conference call he couldn’t reschedule.

Later, explaining his dissatisfaction to the desk clerk, he suggested that the hotel write off his bill those items that were low cost to them but a high price to me — a pay-per-view movie, the telephone charges, and room service. The desk clerk was happy to do so, and they closed the deal right then and there.

Contingent concessions and logrolling play well together, so you may be able to use them in tandem to bring parties to agreement. If a party expresses fears about a future risk or possibility, look for trade-offs of low cost to one party and high value to the other.