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2021/06/01 Articles

How to Conduct Negotiations Like a Pro?

June 1, 2021

You’re in a settlement conference, the parties’ positions are well established and negotiations are well underway. However, you feel that your client has made enough concessions and you decide with your client to issue an ultimatum to the other party. You play the final offer card, but you haven’t even finished presenting the offer when the other party, who is offended, decides to end the negotiations. Clearly, your negotiation strategy didn’t work, and your client is disappointed. What happened? Perhaps you overlooked the psychological dimension of negotiations?

In their article entitled Quelques stratégies psychologiques pour mieux négocier, professor Jean Poitras of HEC Montréal and mediator and conflict management consultant Fernand Bélair point out the importance of this dimension in negotiations. According to these authors, neglecting the human element [translation] “means running the risk of negotiating a disappointing settlement and even causing the discussions to break down”. In this article, we present the four negotiation habits suggested by the authors in order to manage the effects of the psychological dimension of negotiations. 

Habit #1: Getting an overall perspective

Poitras and Bélair divide this step into two parts: creating a list of priorities to consider and assessing the balance of power.

Creating a list of priorities to consider can be summarized as defining and prioritizing, together with the client, their needs and goals and what they are willing to concede. Using this list during negotiations will help to refocus discussions on what is important to the client and ensure that nothing has been forgotten.

In addition, creating a list of priorities is an excellent tool for documenting the file as well as a way to avoid two psychological pitfalls. First, the illusion of transparency posits that persons who are negotiating regularly fail to communicate clearly to the other party what is important to them. As a result, the other party is not aware of the needs of their counterpart. Creating a list of priorities also makes it easier for the client to express their needs.

The second pitfall to avoid is that of blind concessions. In the heat of the moment, there is a risk of losing sight of the client’s interests or making costly concessions. As Poitras and Bélair note, [translation] “it is always painful to realize after the fact that one has made concessions on priority items to make gains that are actually only secondary”. The priority list therefore provides boundaries to avoid this risk from materializing.

Getting an overall perspective also includes assessing the balance of power. Ultimately, this involves managing the client’s expectations so that they are realistic given the strengths and weaknesses of the case. In this regard, the duty to advise requires lawyers to inform their clients about all aspects of their case, both good and bad. The objective is to ensure that the client is able to make an informed decision on the next steps to be taken in their case. Managing the client’s expectations helps to limit criticisms such as, “My lawyer never told me...”. You should also establish different settlement scenarios with your client. In other words, what are the alternatives in the event of a deadlock?

Habit #2: Showing that collaboration is possible 

Too often, parties to negotiations believe that collaboration comes naturally. It’s not true! There is often initial animosity between the parties. From the outset of negotiations, the lawyers must defuse this animosity to maximize the chances of a mutually satisfactory settlement. Moreover, the client should be reminded that the purpose of the negotiation is to arrive at a solution, not to obtain a judgment. There are no winners or losers!

In addition, the authors caution negotiators against creating competition through a self-fulfilling prophecy. This psychological pitfall refers to a negotiator’s apprehensions that lead the negotiator to behave towards the other party in such a way as to provoke the behaviour that the negotiator feared. This competition undermines collaboration between the parties.

That said, how do we create a collaborative environment? Poitras and Bélair suggest quickly sending a clear signal of the desire to collaborate. Make an opening gesture to the other party. Of course, your client’s concession must be strategic and must be a secondary element of the negotiations. In other words, it is a symbolic concession to show good faith and test the other person’s reaction.

In addition, it’s important to delay the search for solutions as much as possible. Before making an initial offer, the parties should seek to understand each other’s point of view and issues. Keep in mind that the party making the initial offer creates an anchor point. This phenomenon refers to the use of information as a reference when it has no connection to the sought-after objective. Generally speaking, it is the first piece of information obtained on the subject. The anchoring phenomenon implies that [translation] “the exploration of solutions revolves solely around an initial offer”. Poitras and Bélair note that [translation] “creating an anchor does not simply reduce the ability of the parties to find creative solutions; a satisfactory settlement may even be called into question because of an often arbitrary first offer”. Thus, if the other party wants to quickly make an offer, first ask them to tell you what needs drove that offer. You will then have a frame of reference to evaluate it.

Habit #3: Using losses as a leverage for negotiating 

Most people have an aversion to losing something. Therefore, convincing our opponent of the benefits of our offer is frequently a strategic mistake. In fact, [translation] “solutions that minimize losses carry much more psychological weight than those that propose gains”. Consequently, take an interest in the other party’s problems and concerns and try to address them.

In this vein, people tend to become attached to things that they have had for some time or that are the result of hard work. Many people overestimate the value of the object and, as a result, complicate the negotiations. It is therefore important to gradually reduce the sentimental value attached to the object. For example, consider the founder and owner of a business. In the context of selling the business, the owner asks for more than it is objectively worth. In such a case, Poitras and Bélair suggest gradually separating the person from the object to which they are attached. In the foregoing example, the buyer of the business could offer to allow the seller to act as a consultant to the business for a period of one year. In this way, the buyer manages the emotional damage in such a way as to avoid paying extra for the sentimental value that the business represents for the seller.

Finally, the last strategy suggested by the authors is to present your demands as a trade-off for your losses. By doing so, the other party will perceive your demands as more legitimate. As Poitras and Bélair point out, this approach treats the other party’s pride with care by making them feel that they are responding to a legitimate need rather than a whim.

Habit #4: Sharing your victory with the other person 

Preserving one’s social image and reputation are two considerations that should not be overlooked in negotiations. Sometimes this even outweighs monetary considerations.

Poitras and Bélair therefore suggest that we avoid putting honour on the firing line. Thus, one must avoid formulating an offer in such a way that the other party must refuse it if it wants to save face. In this regard, final offers, ultimatums or threats can create a context in which the other party feels compelled to refuse, even if the offer is advantageous.

Similarly, it may be strategic to present the offer in a form that compliments the other party. For example, you can do so by pointing out that their arguments changed your client’s mind or by letting them present the chosen solution as their own.

Moreover, leave some decision-making control to the other party. Nobody likes to be backed into a corner. On the contrary, most people appreciate having freedom of choice and feeling that they have the ability to influence the course of negotiations. In fact, Poitras and Bélair warn negotiators against the psychological phenomenon of personal devaluation. This is [translation] “the tendency of parties to diminish the value of each other’s proposals simply because they come from the other party”. This phenomenon is influenced by the quality of the relationship between the parties and whether or not there is freedom of choice. It is therefore important to give the other party some leeway. To do this, it may be appropriate to find two or three variations of your final offer, even if the variations only involve technical elements. It gives the other party the impression that they have the last word.

We have discussed some of the thoughts of Professor Poitras and mediator and consultant Bélair on how to improve settlement talks and arrive at a mutually satisfactory agreement. By keeping in mind the elements we have explored, you will increase your chances of reaching a mutually satisfactory settlement. In doing so, you will reduce the risk that the client or the other party will question the transaction. From this perspective, mastering the psychological dimensions of negotiations also means applying preventive measures to ward off malpractice complaints.

 

Reference: Jean Poitras and Fernand Bélair, “Quelques stratégies psychologiques pour mieux négocier”, in Chantale Mailhot et al. (ed.), Habiletés de direction, 2011, 184.