General Practice, Solo & Small Firm DivisionMagazine

Volume 17, Number 7
October/November 2000

The Ten-Minute Negotiator

Bargaining Basics for Busy Lawyers

By H. Lee Hetherington and X. M. Frascogna, Jr.

Negotiation is a game. It’s played every day of the year over the phone; through the mail; via fax machines and e-mail; and face to face in homes, stores, restaurants, and offices, especially law offices. Any time two or more people communicate with each other for the purpose of changing the status quo to advance their personal or economic interests or to resolve conflicts, they are negotiating.

While we all negotiate, most people don’t depend on the process to earn a living. Lawyers do. Your income, professional reputation, and self-esteem are significantly affected by your ability to bring about change and solve problems through the give-and-take process of bargaining. The good news is that most of us are already pretty good at the game of negotiation. Why? Because, as a group, we are intelligent, resourceful, thorough, and have far more experience at brokering deals and settling disputes than most nonlawyers. But that doesn’t mean there isn’t room for improvement.

This article offers busy lawyers a quick, foolproof approach to planning, conducting, and closing any negotiation, all without the aid of charts and graphs, confusing jargon, and endless theoretical explanations. It is a negotiation roadmap that will get you where you want to go under any circumstances you are likely to encounter.

The starting point of every successful negotiation is a motivated person unwilling to live with the status quo. But just being dissatisfied with the present is not enough. The first step to success in any negotiation requires the formulation of clear, specific goals. Sounds simple, doesn’t it? Yet, how many times have lawyers and their clients plunged headlong into negotiations armed only with a vague notion of their goals and what they were willing to give up to achieve them? Phrases such as "best deal possible," "top dollar," or "as soon as possible" are tip-offs that someone has not done his homework. Goals should be highly specific: $100,000 maximum or $85,000 minimum at no more than 8 percent interest—closing within 45 business days. Simply put, "What is it your client wants? Be specific."

Creating a Floor and a Ceiling

We have found that asking clients two questions can help provide the focus and structure necessary for narrowing the issues when it comes to setting goals. We refer to this as the floor/ceiling approach.

Ceiling. Start with the easiest question first. In a best-case scenario, if your client could have everything she wants in a particular negotiation, what would that be? By having your client articulate every conceivable point, you will have effectively clarified what the client’s best-case scenario would look like.

Floor. In contrast, imagine a worst-case scenario: What is the very least your client would accept to make a deal? This is really the key question. The answers to these two questions create a floor and a ceiling for the negotiation. A deal, if there is to be one, should fall somewhere within those two extremes.

Deal Points, Secondary Points and Trade Points

Once you have clearly identified your floor and ceiling, the specific items on your wish list should be prioritized and assigned to one of the following categories: deal points, secondary points, and trade points. This process should be done jointly and in writing with your client.

Deal points. Deal points are those fundamental items that are absolutely essential to a successful deal. A true deal point should always provide the floor of your negotiation. Failure to obtain a deal point should be your signal to invoke your contingency plan and walk away from the negotiation.

Secondary points. Secondary points are important, but not so crucial as to jeopardize the negotiation. While it is preferable to gain these in the form of concessions, the deal shouldn’t fail because you are unsuccessful in getting one or more of them.

Trade points. Contrary to what many highly competitive people want to acknowledge, concessions are essential for a negotiation to work. Trade points provide the ammunition every negotiator needs to make effective concessions. Trade points are made up of low-priority objectives that can be readily relinquished as concessions in exchange for more important deal or secondary points. It should be noted that trade points can also be comprised of tangible or intangible bargaining chips that do not relate to specific objectives sought by your client. Effective use of leverage involves identifying things of little or no consequence to your client that might be valued by the other side.

Step into the other person’s shoes. Once your client’s goals have been identified and prioritized, repeat the process from the vantage of your negotiating counterpart. Write down your best estimate of the opposite side’s best-case and worst-case scenarios. Then, break the information down into deal, secondary, and trade points. A side-by-side comparison will readily indicate areas of consensus and difference. For instance, if your deal point happens to be one of their trade points, you can expect a quick, win-win deal. However, if your deal point is also theirs, expect a long and difficult negotiation.

Contingency Planning

The last step of pre-negotiation planning involves identifying all of your client’s alternatives to a negotiated agreement. After doing so, rank them in order of priority from the most attractive to the least attractive. This process ensures that you will never finish a negotiation in a worse position than when you started. If you accept the premise that for a negotiation to be successful, any final agreement must result in a net gain over the status quo, it follows that anything short of obtaining your basic deal point objectives should be a clear signal to abort discussions and walk away from the negotiation. When you walk, make sure you walk to your next best available alternative to a negotiated conclusion, whatever that might be. Once you have done this for your client, construct your counterpart’s alternatives to a negotiated outcome as best you can.

Roger Fisher and William Ury, in their classic book, Getting to Yes, refer to this final phase of contingency planning as BATNA (Best Alternative to a Negotiated Agreement). By identifying your goals as well as your BATNA at the outset, you effectively insulate yourself from having to identify alternatives in a pressured situation. You also avoid the common trap of substituting your objective goals for the more subjective and less rational alternative of making a deal for the sake of the deal, in order to justify the time investment you have made pursuing objectives that are out of reach. If at any time you find, for whatever reason, that the negotiation has fallen below the floor you set as the absolute minimum acceptable position with no hope of returning, it is time to invoke your BATNA and walk away from the deal. No exceptions. Period.

Leverage: The Prime Mover of Negotiation

Four factors—uncertainty, time, opportunity, and sanction—are what we refer to as leverage. They are the elements that make the negotiation process work. Your task is to identify and invoke the appropriate mix of these four levers to alter the status quo in your favor.

Uncertainty. Of the four levers, uncertainty is clearly the most powerful. The potency of uncertainty is derived from a fundamental truth of human nature. People fear the unknown. This fear drives all bargaining relationships. An analysis of any negotiation will reveal a common thread: bargainers consistently seek to trade uncertainty for certainty. The price they pay is measured in concessions and compromise.

The multibillion-dollar-a-year in-surance industry is predicated on the leverage of uncertainty. The prospect of premature death, disability, accident, hospitalization, surgery, robbery, burglary, fire, tornado, flood, and earthquake drives individuals to pay thousands of dollars in premiums every year. Think back over the past year. How many of these unfortunate events happened to you? Probably none. But just because last year was relatively uneventful does not guarantee the same for the uncertain year ahead.

Although. The potency of the leverage of uncertainty is unquestionable, it can also be transitory. Once uncertainty is faced, its power evaporates. Recall your own experiences with uncertainty—fear of riding a bicycle without training wheels; fear of driving the family car by yourself for the first time; fear of flying; fear of public speaking. We confront uncertainty throughout our lives. Once we do, and live to tell about it, the mountain is reduced to a molehill. So it is with negotiation.

Time. If uncertainty is the most powerful lever, time is clearly the most subtle. This multifaceted lever encompasses numerous phenomena, all of which are tied to recurring patterns of human perception and reaction.

The starting point is the realization that time is a scarce, tangible commodity. At the commencement of bargaining, each negotiator turns over an invisible hourglass containing varying amounts of sand. Based on the contents of these hourglasses, separate deadlines for a negotiated outcome are set. As the sand dwindles, pressure to act mounts. Obviously, knowing how much sand everyone has becomes extremely important. This is why smart negotiators never reveal their internal deadlines while always seeking to uncover their counterpart’s end point for resolution.

Because bargaining does not occur in a vacuum, every transaction is necessarily subject to external pressures and circumstances. As time passes, interest rates rise and fall, fiscal years end and begin, markets open and close, options develop and dissolve. The more time a negotiator possesses, the more options he or she has and the more room there is to maneuver. If an opponent is anxious, there is time to wait. If he’s angry, there is time to let him cool off. If her expectations are unrealistic, there is time to lower them. Most importantly, if your bargaining counterpart is under a deadline, there is time to exploit it.

Opportunity. What is popularly known as win-win negotiation, where each party achieves its objectives with no downside, is nothing more than use of the leverage of opportunity. People are willing to alter the status quo when they perceive that the outcome will result in some type of gain or advantage. Opportunity can be measured in an infinite variety of tangible and intangible benefits. A bargain price, a favorable interest rate, or a unique parcel of real estate are common examples. However, one should never underestimate what others value. More often than not, opportunity is measured in intangible or psychological terms. Recognition, inclusion, and security represent sought-after opportunities for which people are willing to pay. Often, it is information, the extension of time, or the promise of some future consideration. The key to maximizing the leverage of opportunity is to determine ways to supply the wants and needs of your bargaining counterpart while making sure you’re receiving benefits of greater or at least comparable worth.

Sanction. The flip side of opportunity is the leverage of sanction. Although everyone agrees that win-win negotiation and joint problem-solving are more productive and enjoyable exercises, they are not always options. This is especially the case in zero-sum personal injury lawsuit settlement negotiations, where there is no continuing relationship between the parties.

Sanction can be anything the other party would pay to avoid. An unfavorable deadline, an alternative offer, or a price hike can be just as effective as a threat to file a lawsuit or break off negotiations. As with the other levers, the objectives of the parties and the surrounding circumstances provide opportunities to create credible sanctions.

To be effective, a threatened or promised sanction must be credible. There is nothing more deflating than to threaten action to which the opposition responds with indifference. Assuming you have identified a credible sanction, the next step is to communicate it effectively. A sanction has no power to influence action if it is kept secret. Only when the promised sanction is combined with uncertainty will it produce results.

Because most people do not appreciate threats and ultimatums, the leverage of sanction is potentially the most dangerous of the levers. You would be well advised never to combine a harsh message with a harsh tone. Better yet, when communicating a potential sanction, it is best to mask it or tie it to objective circumstances beyond your control.

H. Lee Hetherington is a professor of law at Mississippi College School of Law and president of Pathstar Communications, LLC, an educational training and consulting firm headquartered in Jackson, Mississippi. X. M. Frascogna, Jr., is the senior partner in the Frascogna, Courtney law firm in Jackson, Mississippi. His practice is devoted to the representation of clients in the sports and entertainment industries and corporate matters. This article contains excerpts from their book, Negotiation Strategy for Lawyers. A new edition of the book will be published by the ABA in early 2001.

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