Life Skills Toolbox

06/15/2023

Let’s look at one of the most debated issues in negotiation: First offers!

People have very strong opinions about first offers and many believe the other party should always make the opening bid.

According to the scientific literature however, – there is no evidence in support of this argument.

Actually, the first person to anchor the negotiation with a legitimate offer has the advantage.

Anchors work to psychologically frame the negotiation whereby all counteroffers are benchmarked against the initial proposition.
In fact, initial offers in a negotiation correlate 85% with the final agreement.

So how do you protect yourself against a first offer that is quite different than what you were planning to propose?

1. Immediately counteroffer with a legitimate proposition – meaning, there is justification for your ask (think precedent, years of experience, market value…)

2. Frame your counteroffer as an invitation to brainstorm alternatives that are suitable to both parties
3. Be assertive – but don’t be rude

Below is an example of how you can respond. The context is a customer-vendor relationship and was inspired by one of Leigh Thompson’s examples of counteroffers.

“I appreciate your openness to discuss terms that could potentially define our partnership. I too dedicated time to thinking through a set of conditions for our working relationship. I want to be transparent - my expectations and your initial proposal are significantly different. However, this is by no means a roadblock. Instead, I view it as an opportunity for us to delve deeper into our discussion and try to understand one another’s positions”.

Now it's your turn!

Think, practice and write down your response to an offer that may be significantly different than what you want to initially
propose!

Want to learn more about effective negotiation strategies? Join our Negotiation Master Class June 21 from 7:00 to 8:30 pm.
https://www.lifeskillstoolbox.ca/negotiationmasterclass

Not yet a member of our tribe? What are you waiting for?
https://www.lifeskillstoolbox.ca/join-our-tribe

To your success!

Dr. Gill

06/15/2023

The power of Negotiation Anchors

Negotiation, at its core, is an art form - a subtle balance of persuasion, psychology, and strategic communication. Central to this art is the concept of "anchors," one of the most powerful and potentially transformative tools in a negotiator's arsenal.

What are Negotiation Anchors?

Anchoring in negotiation refers to the practice of establishing a reference point or 'anchor' that sets the tone for the rest of the negotiation.

It’s usually the first significant number or substantial proposal that is presented and serves as a baseline from which subsequent discussions and counter-offers evolve.

The strength of anchors lies in their ability to influence the perceived value of a deal and guide the negotiation in a particular direction.

The Power of Anchoring

Psychologically, we are all prone to what behavioral economists call the 'anchoring bias.' Once an anchor is set, we subconsciously use it as a mental benchmark for decision-making.

This human tendency can create a subtle shift in the negotiation landscape. For instance, in a salary negotiation, an employer who proposes a specific salary first can potentially anchor the negotiation range lower, than if the prospective employee had initially spoken of their salary expectations.

Anchors are also about establishing value, setting expectations, and framing the negotiation. An effective anchor communicates not just a price, but a compelling story about why that price makes sense.

Pitfalls of Anchoring

Despite the potential benefits, anchoring can also present pitfalls. The main risk lies in setting an anchor that is considered too extreme by the other party.

A price too high or a demand too outrageous can lead to negotiation breakdown, leaving both parties dissatisfied. It's essential to base anchors on credible information.

Anchors can also constrict the conversation to one specific issue, excluding other creative solutions that might lead to a more satisfactory result for all parties involved.

Strategies for Effective Anchoring

Research and Prep: Before setting an anchor, do your due diligence. Understand the market, comprehend the interests of the other party, and have a clear idea of your walk-away point.

Be flexible: Remember that negotiation is a dynamic process. Be ready to adjust your expectations based on the responses to your anchor.

Don’t Rush: Don't feel pressured to accept the first anchor thrown your way. Take your time to consider its implications.

Want to learn more strategies on how to negotiate effectively? Join us June 21, 2023, from 7:00 to 8:30 pm. https://lnkd.in/eDTiJM5G

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Tomorrow we’ll discuss what happens when you are on the receiving end of an anchor.

To your negotiation success!

06/13/2023

3 things not to do in a negotiation

Negotiating can be inherently stressful for many of us because it involves uncertainty and ambiguity. We don’t know how the other party is going to respond to our requests, we may be uncertain of their interests or goals, and the stakes are often high and have significant consequences. The outcome may affect our job, finances, or relationships.

This stress can lead to premature concessions.

A premature concession refers to giving up something of value too soon or without getting anything in return. It typically happens when a negotiator is too eager to close a deal.

Here are 3 ways negotiators work against themselves by conceding prematurely:

Rush to break the silence: Many people attempt to fill the discomfort of silence by talking. In negotiations, this can prompt you to make premature concessions. Get comfortable with silence and use it strategically. People often reveal important information when they start talking. So, listen!

Miss Opportunities for Trade-Offs: By conceding prematurely, you likely miss opportunities for trade-offs that could result in a more optimal final agreement. When you listen strategically, you will discover what is important to the other party. That gives you leverage. If you have done your homework and know your priorities, exchange something that is not of high value for you, for something that is valuable to them.

Let's imagine a scenario in which you are negotiating with your employer about working from home.

You propose to work from home five days a week, as it would improve your work-life balance and reduce commuting costs and time. However, your employer is resistant to this idea, because of the importance of team collaboration and creativity. So, you suggest a compromise and ask for 3 days instead of 5 and agree to be available for video calls during certain core hours to maintain team communication and collaboration.

This way, you get some of the flexibility you desire, and they can ensure regular in-person collaboration by your being in the office 2 days a week.

This is a typical give-and-take scenario in negotiation where both parties make concessions to reach an agreement that satisfies both parties' needs: your need for flexibility and the employer's need for team collaboration.

Make consecutive concessions. Effective negotiation is based on the principle of give and take. If you make a concession, you should aim to receive something of equal or near-equal value in return. One concession begets another!

Want to learn more about effective negotiation strategies? Join our Negotiation Master Class June 21 from 7:00 to 8:30 pm. https://www.lifeskillstoolbox.ca/negotiationmasterclass

Not yet a member of our tribe? What are you waiting for?
https://www.lifeskillstoolbox.ca/join-our-tribe

To your negotiation success!

Dr. Gill

06/12/2023

Make a precise first offer and avoid round numbers!

One of my all-time favorite negotiation strategies originates from a study conducted by Malia Mason and Colleagues. These researchers were interested in the effect that precise numbers have when making a first offer.

You see, people tend to speak and write about numbers in multiples of powers of base 10. Think
10, 1000, 10, 000….. and this preference tends to manifest in negotiations.

This phenomenon also translates to real world markets. If you look at the real estate market, most homes, that is 71%, have a listing price at a dollar amount that has 3 trailing zeroes in the price range of $100,000 to $999, 999.

In the 1-to-10-million-dollar range, researchers found that less than 2% of homes are precisely priced.

Why does it matter?

It’s a matter of perception.

But before I get into 3 the reasons why precision is a better tactic than using round general numbers, let me remind you that nothing replaces PLANNING & RESEARCH in a negotiation. Meaning, your offer needs to be legitimate. Make what, one of my favorite negotiation scholars, Leigh Thompson calls, a wild ass offer, and people will leave the negotiation table.

So why does precision, when making a first offer, trump general whole numbers? Here are 3 reasons:

1. The Anchoring Effect: Precise numbers make your first proposal seem more thoroughly researched and carefully considered. This anchors the negotiation in your favor. The anchoring effect is a cognitive bias where people tend to rely too heavily on the first piece of information (the "anchor") they receive when making decisions.

2. Credibility: Precise numbers give the impression that you are knowledgeable about the item's worth and have done your homework, which tends to increase your credibility. Round numbers, on the other hand, seem arbitrary and suggest a lack of research or understanding.

3. Less Room for Large Counteroffers: When you propose a precise number, the other party may perceive less flexibility and feel constrained to make smaller counteroffers. For example, a proposal of $5,000 invites a counteroffer of $4,000—a 20% decrease. But a proposal of $5,140 is less likely to be countered with $4,112, even though this is the same percentage reduction.

Want to learn more about effective negotiation strategies? Join our Negotiation Master Class June 21 from 7:00 to 8:30 pm.

Not yet a member of our tribe? What are you waiting for?
To your success!
Dr. Gill

06/11/2023

Sometimes it is useful to settle on a good enough outcome than to continue a negotiation. But if this is your go to strategy- there are long term pitfalls that will hinder your personal development and career success.

This behaviour actually has a name. It is called satisficing.

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