August 9, 2012

The most important stage of any bargaining interaction takes place before the opposing parties even begin to interact with each other – Preparation. Knowledge is power when persons interact, and each side should endeavor to obtain significant knowledge when they prepare. They need to ascertain the relevant factual, legal, and economic issues. They need to learn about their potential strengths and weaknesses. Once they have obtained substantial knowledge regarding their own side, they need to look across the table and ask themselves about the other side’s circumstances. What factual, legal, and economic issues are impacting them?

Once negotiators have developed a thorough understanding of the relevant factors, they must ask three critical questions. First, what happens to their side if no agreement is achieved? The answer to this inquiry provides them with a bottom line. How far will they move toward the other side before they decide to take their non-settlement alternatives? After they answer this inquiry, they must look across the table and try to ascertain what will happen to the other side if they fail to reach an agreement with them. The answers to these two questions determine relative bargaining power. Whichever side has better non-settlement options possesses greater bargaining power – IF they know how to use it. Negotiators must next ask themselves what their goals are for each item to be exchanged. There is a direct correlation between aspirations and results. Persons who hope to achieve better results tend to do better than cohorts with lower expectations. When in doubt, negotiators must reach higher, BUT they must always establish realistic objectives. If they fail to do so, they either reach no accord or drop towards their bottom line.

The final question concerns where they plan to begin their interaction. Should they start with modest requests or more one-sided demands favoring their own side? Because of a factor called anchoring, persons who begin with modest offers actually embolden their opponents and cause them to move away from them psychologically. On the other hand, person who begin with less generous offers cause their opponents to lower their sights and begin to think they will not do as well as they originally thought.

Once negotiators have completed this process, they have to plan their overall bargaining strategy. How do they visualize moving from where they begin to where they hope to end? What bargaining techniques do they plan to employ, and what concession pattern do they envision? Individuals who are completely prepared for bargaining interactions achieve far better results than their less prepared cohorts.