Beyond Winning

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Beyond Winning Page 25

by Robert H Mnookin


  COMMITMENT TACTICS

  Persuading the other side that you have no freedom of choice with respect to a particular issue can be a powerful strategy. In a classic example often attributed to Thomas Schelling, two cars begin to enter an intersection at the same time.7 Both drivers want to get through the intersection first, but neither wants a collision. But if one driver could detach his steering wheel and conspicuously throw it out of the car, the other driver would have to permit him to pass through. Why? Because the first driver has changed the second driver’s options: he must now defer or cause a collision, whereas before there was some chance that the other driver would slow down first. This is how commitment tactics work. When one party limits his freedom of action on a particular issue, “the other bargainer is stuck: he confronts a preordained choice between accepting the commitment point—which is at least in the bargaining set—or taking his own, less desirable alternative.”8

  Commitment strategies come in many forms, but to be effective, a commitment must seem binding. Creating a commitment that is credibly irreversible is not easy, because often a party will be perceived to have the power to change course. Lawyers commonly assert, for example, that their clients are committed to a certain outcome from which the lawyer is not authorized to deviate. “There’s nothing I can do. And we need to reach agreement, if at all, in the next two days.” But why is it credible that the client’s decision is irreversible? The client could always later expand the lawyer’s authority. (The lawyer’s claim might be more credible if he could demonstrate that the client had left town and was on a sailboat somewhere in the Pacific where he couldn’t be reached by phone for some weeks.)

  Negotiators sometimes pledge their reputations in order to make a commitment seem credible. For example, a labor leader might say both to his constituents and to the media that he will resign from his leadership position rather than accept less than a 7 percent wage increase in upcoming negotiations. By making this public pledge, the labor leader is attempting to limit his freedom of action at the bargaining table by signaling to the employer that his career is on the line.

  Commitment strategies often involve making promises to third parties. Sellers insert most-favored-nation clauses into agreements with buyers as a commitment device. The clause enables a seller negotiating with a subsequent purchaser to state credibly that the grant of preferential terms is precluded by its prior arrangements with other buyers. This commitment strategy is used in many contexts. If a shopping center landlord can show that granting a lease concession to a particular tenant will require him to modify previous leases with ten other tenants, and therefore that the cost of making the concession would be much too high, the landlord might persuade his counterpart to drop demands regarding that provision.

  There are obvious risks to these commitment tactics. First, if both parties play the game, and throw away their steering wheels, they will crash in the middle of the intersection. Second, because prior commitments may offend some bargainers’ notions about legitimate process in negotiations, they can damage relationships just as the small-concessions game does.

  TAKE-IT-OR-LEAVE-IT OFFERS

  In a third common tactic, one party threatens that the negotiation will end if her offer (or demand) is not accepted. Lawyers often play chicken in this way. Negotiators use take-it-or-leave-it offers for the same reason that they employ commitment strategies: to signal to the other side that they will go to a certain limit and no further.

  Such offers need not be extreme. Indeed, some negotiators develop a reputation for not haggling. Lemuel R. Boulware, General Electric’s Vice President of Relations Service from 1946 to 1960, informed the unions that he would carefully study market conditions and what comparable employees at other companies were paid and then make a “fair, firm offer.”9 A critical component of GE’s strategy was a contemporaneous communications program selling its proposal to its employees and the general public. This also served as a commitment strategy to lock the company into its own position. This technique was ultimately challenged on the grounds that it was an unfair labor practice that in essence amounted to a refusal on the part of General Electric to negotiate. Boulwarism today is used to describe a negotiation tactic in which one side unilaterally evaluates what in its mind is fair and then makes a firm final offer based on that decision.

  Akin to this tactic is the exploding offer, which self-destructs after a certain period of time. A store might advertise: “Mattress sale—today only!” Or, as some law school students have learned from painful experience, a judge might say to a clerkship applicant, “I will offer you a clerkship in my chambers, but only if you accept today.” Lawyers often suggest that a settlement offer has a short fuse and will be withdrawn if not accepted quickly. Tony, for example, might be told: “If Jake will agree today to pay Samantha $1,500 a month alimony for 12 years we can settle. But if he doesn’t accept today, the offer is withdrawn and we’ll go to court.”

  Any exploding offer that is better than your reservation value can be exceedingly difficult to reject. It draws much of its power from what psychologist Robert Cialdini calls the scarcity principle, which holds that “opportunities generally seem more valuable to us when their availability is limited.”10 Both loss aversion and the endowment effect may provide psychological explanations for the scarcity principle. Cialdini has posited that the explanation for this principle is that people are often more motivated to prevent a loss than to gain something of equal or lesser value, that people tend to want to possess an item more if scarcity threatens its availability.

  The risks of the take-it-or-leave-it offer are similar to those associated with commitment tactics. The danger is that if two parties play chicken, there may be no deal.

  Changing the Game: Our Suggested Approach

  If you begin your negotiations by leading the way toward problem-solving, you may be able to head off hard-bargaining tactics at the start. But what if, for whatever reasons, the other side discloses nothing about its interests, and simply makes extreme demands, adopts unreasoned positions, and engages in other tactics? What should you do? You need to be prepared to deal with the other side’s hard-bargaining tactics in a way that protects your client’s interests while you continue to try to convert the other side to a more collaborative approach. Here we consider a range of responses that can encourage problem-solving.11

  STAY WITH YOUR GAME

  Don’t let the other side’s tactics inhibit you from playing your game. Just because the other side is using a different strategy doesn’t mean that the general approach we’ve spelled out won’t work. Obviously, problem-solving works best if both sides are engaged in it together. Nevertheless, if you remain focused on interests, on evaluating legal opportunities and risks, and on generating creative options, progress is often possible. Almost anything a hard bargainer says can be reframed and restated as an interest, an option, or a suggestion about a norm that might be used to resolve distributive issues. This can be a form of “negotiation jujitsu”—deflecting the difficult tactic and treating whatever the other side has said as a part of a problem-solving negotiation.12

  Returning to our divorce example, imagine that early in the negotiation Samantha’s lawyer states a “non-negotiable” demand for $4,000 a month alimony payable for the next twenty years with an adjustment for inflation. Tony could reframe this in a variety of ways. He could say, “Long-term financial security is obviously important to your client. Help me understand her other interests” (reframing it as an interest and inquiring). Or he might say “That’s one option. Let’s discuss some other ways of providing financial security” (reframing it as one of many options). Alternatively, Tony might focus on norms and ask, “Help me understand why you think that’s reasonable and why you believe, if this case were litigated, a court would award that?”

  Suppose Samantha’s lawyer makes a categorical claim about what a court would do. She says, “If this goes to court, a judge is going to give Samantha half of your clie
nt’s inherited property.” Tony might say, “Well, I think that’s one possible outcome, but I think it’s unlikely. Let’s talk more specifically about how we’re both evaluating the legal risks and opportunities here. I have some cases where a judge refused to treat inherited property as part of the marital estate where the couple had been married eight years. But you may know some cases I don’t—help me understand the basis of your conclusion.”

  Difficult tactics often work because they induce a cycle of reactions and counter-reactions in which we forget what our purpose is. But you don’t have to fall into this trap. If they’re insulting, you can ignore it. If they make a take-it-or-leave-it offer, you can treat it as an offer and make a counter-offer. A hard bargainer can ask you to bid against yourself, but that doesn’t mean you have to go along. Throughout the negotiations, you may just bypass their hard-bargaining tactics and try to make use of what they’ve said to further your problem-solving approach.

  NAME THE GAME AND SUGGEST ANOTHER

  A related way to deal with difficult tactics is to name their game and negotiate explicitly to approach the negotiations in a more productive way. Consider our example from Chapter 5, involving two attorneys negotiating over the sale of an old factory that might be on contaminated land:

  VICTORIA’S ATTORNEY: I’ve consulted with my client. We’re not going to make any representation about the environmental conditions of the site. I’m afraid that’s the way it’ll have to be if you want to develop this property.

  DAVID’S ATTORNEY: Look, I can understand why your client might prefer selling the property “as is.” You’re essentially saying “Take it or leave it.” But I can play that game, too. After consulting with my client, I could report to you that he insists that as a condition of the deal the seller warrant that the property is in complete compliance with all applicable environmental laws and that furthermore you post a substantial bond to back it up. Then we could both dig in and play chicken and see who blinks first. But I think our shared problem is how to learn—at reasonable cost—what is now known, if anything, about the land and what can be easily discovered about the actual condition of the property. What can we do to set up a process to solve this mutual problem?

  This response involves several steps. First, you share your perception of what the other party is doing. In some cases, you may doubt that they are employing a hard-bargaining tactic purposefully; in such circumstances, you may need to share your observation tentatively, by saying something like “I’m not sure if this is correct, though it appears to me that you’re saying you can’t move on this issue because your client is insistent. Essentially, the client has tied your hands. Is that correct?” The second step is to show that you can play the game too. Thus, David’s counsel lets the other side know that he could claim that his client had tied his hands on the same provision.

  The last step is to initiate a conversation about another process that might work better from the perspective of both parties. A bargainer will be interested in changing the game only where the new game has the possibility of producing better results than they will get from playing hardball. But because you’ve been able to name their game, and perhaps have even demonstrated its futility by showing you can play it too, you are well poised to outline the potential benefits of problem-solving.

  CHANGE THE PLAYERS

  Another technique for dealing with difficult tactics is to change the game by changing the players. In everyday life we’ve all used this technique. When a salesperson won’t give a refund or allow an exchange, you politely ask to speak to the supervisor. Needless to say, in legal negotiations this is somewhat more complicated. But often it can be quite possible.

  Sometimes the lawyer on the other side is being difficult, and you conclude that if you or your client could communicate directly with the client on the other side, you could resolve your remaining differences. The most common way to get around the other lawyer and communicate directly with the client is to make a written proposal which contains your reasoning and states why, from the other client’s perspective, some other course of action makes sense. In most states, an attorney must communicate a written offer to the client.

  Another way to change the players to get around the other attorney is to request a meeting with both lawyers and clients. At such a meeting you may be able to focus your appeal to the client on the other side, essentially bypassing the troublesome lawyer. By asking the other client questions and directing explanations to her, you may be able to persuade her and get the matter resolved.

  What if you become convinced that the lawyer on the other side has to go if a deal is to be made? Sometimes this can be accomplished. Consider this example. A large bank, represented by a major New York law firm, was in the process of acquiring a smaller regional bank. The lawyer representing the large bank, after spending several fruitless hours trying to explain to an inexperienced lawyer on the other side why the draft document that the lawyer had tried to create from scratch would not work, reluctantly reached the conclusion that the deal could never be finished within the time available unless somehow the seller was represented by a more experienced attorney. But how to get rid of this other lawyer? The acquiring bank’s attorney knew that he could not call up the CEO of the selling bank and tell him to get a new lawyer. But others could. The acquiring bank’s lawyer explained the situation to his own client’s CEO and his client’s investment banker. They in turn called the seller’s CEO and the seller’s investment banker, and they both carried the same message: the success of the transaction required that the seller be better represented. Both the investment banker and the buyer’s CEO offered to provide a list of reputable attorneys who could ably represent the seller. The seller quickly took the hint and substituted new and more sophisticated counsel.13

  Of course, you can also change the players on your side of the table. If your relationship with the other lawyer isn’t working and you can’t find a way to remove her, you might want to remove yourself—at least temporarily. Have a senior colleague step in or join you at the table. Delegate several negotiation sessions to a skilled subordinate. Or perhaps withdraw from the case completely. It takes two to tango. If you and the other lawyer can’t dance, it may not serve your client’s interests to keep stepping on the other side’s toes.

  You may also want to change the structure of the game by adding neutral parties—such as a mediator or a neutral expert—to the negotiation. The neutral might be able to improve the process, by having sessions where the clients meet without their lawyers, for example, or by helping the parties communicate. Or you may hire a neutral to help evaluate your case. In a deal-making negotiation, an expert may be able to come up with options for dealing with environmental hazards, for example, that both parties would accept.

  PLAY THEIR GAME, BUT BETTER

  Sometimes your efforts to problem-solve in the face of hard-bargaining tactics either won’t seem to be working or won’t seem worth it. If the other side won’t come around and you’re fairly confident that you can beat them at their own game, playing their game may make sense. Or, if the stakes are low and you’re not very concerned about setting a precedent or establishing a problem-solving process going forward, there might be little to lose. The key is to make a deliberate choice: don’t just respond reactively to their approach by fighting fire with fire.

  YOU CAN ALWAYS WALK TO YOUR BATNA

  Ultimately you may decide that the other side is never going to change its approach and that your best course of action is to break off negotiations. If it’s clear that their offer isn’t as good as your best alternative, this is a relatively easy choice. But what about when the other side puts a proposal on the table that’s just a bit better than your alternative but seems very one-sided and unfair? Imagine, for example, that you represent a plaintiff in litigation and you are very confident that if you went to court you’d be awarded approximately $100,000—but that a trial would cost your client an additional $30,000 in otherwise avoida
ble transaction costs. You also know that the defendant faces similar costs, meaning that any offer between $70,000 and $130,000 should be better for both sides than litigating. You offer to settle for $100,000 and the defendant’s “firm and final” offer is $72,000. The trial date begins tomorrow. What do you recommend to your client?

  There’s no easy answer. The option on the table is better than the client’s BATNA, but does it meet his interests? How much does your client care about fairness? Many clients might keep litigating—even if they incur costs—rather than accept an offer that they and their lawyer truly believe is lopsided and unfair. Making this decision obviously requires great coordination and communication between lawyer and client, because a variety of intangible concerns are implicated. The client may well decide to reject the offer and proceed to trial. But it’s important to help the client understand the legal opportunities and risks and make an informed choice in light of his full range of interests.

  Putting It All Together

  To make this range of responses work, it’s crucial not to reward the other side’s bad behavior. If you hope to problem-solve, you must not let an adversarial lawyer believe that by using hard-bargaining tactics he can gain an advantage over you. If you do, he’ll have no reason to change his game.

 

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