From the Blog of Phyllis G. Pollack.
Often, during a mediation, I have asked a party if she wants to make the first offer. More times than not, especially if it is the defendant, the party tells me that she wants the other party to go first on the rationale that it is a sign of weakness or some similar explanation for her to make the opening offer.
In response, I often explain that just the opposite is true: she who makes the first offer often has the advantage: she sets the parameters of the negotiations as well as affecting the other party’s expectations. In sum, she has the “upper hand” or the leverage in the negotiation.
This notion of “anchoring” was the topic of Linda Bulmash’s latest Negotiation Tips (Los Angeles County Bar Association Vol III, No. 4 – January 2010) entitled “Making the First Offer Can Be the Smart Move.”(LACBA “Negoiation Tips” (January 2010) )Ms. Bulmash notes that the best negotiators think in terms of affecting the other party’s expectations in deciding whether to make the first offer:
“First offers act as an anchor point, drawing the other side into your suggested range. Studies have shown that 85 percent of the time, first offers correlate with the final outcomes. Even if the first offer is not within a reasonable range, it still affects the negotiation’s outcome.”
”For those of us who think we are hip to the game, savvy and sophisticated, the impact of first offers shows that we are still suggestible. As proof of that theory, participants in a college study were asked to state their Social Security number before estimating the number of physicians in Manhattan. They all picked numbers that correlated with and were close to their Social Security number.”
”Before deciding whether to make the first offer, ask yourself:
1. What do I want to achieve by making this offer?
2. Do I have enough information to make this offer?
3. How do I want to affect the other side’s expectations?
4. How will this offer affect the other side’s expectations?
5. What kind of offers and counteroffers do I need to make to move strategically closer to my bottom line?
6. Should my offer be firm or flexible?
7. How can I propose the offers”
So, in your next negotiation, instead of automatically rejecting the notion of making the first offer, take a moment and look at the long range effect of your going first: how will it affect the expectations of the other side. Will your first offer, effectively, act as an anchor so that you resolve the matter within your range of expectations?
. . .Just something to think about.