Negotiation Strategies: The Impact of Starting Points on Final Agreements
In the world of business, negotiations can often be a challenging and complex process. One cognitive bias that can significantly impact these discussions is anchoring, where too much weight is given to the first number put on the table. This article explores a strategy for defusing anchors and achieving a fair outcome in negotiations.
A small business owner recently demonstrated this strategy effectively. Faced with an unfeasible proposal, the owner recognised the anchor as a cognitive bias and forcefully rejected it, stating, "We are miles apart on price." By doing so, they prevented the anchoring bias from narrowing the negotiation range prematurely.
Recognising an anchor is crucial because, as Professor Guhan Subramanian, a faculty member at the Program on Negotiation at Harvard University, explains, "You can't defend against something you don't see coming." After defusing the anchor, it's essential to move quickly to your counterproposal, but avoid "protesting too much," as it may validate the anchor.
Another effective tool in defusing anchors is silence. After the other party makes an aggressive offer, remaining silent can create discomfort and encourage them to rethink or soften their anchor. This strategy also buys you time to think and reduce the influence of psychological biases.
Preparation is key in any negotiation. Thoroughly researching the subject matter with data and objective criteria can help form a balanced view and ground your counteroffers in factual information. Using range offers instead of a single number can also prevent the other party from locking in on a fixed anchor. Taking breaks to reflect can help reduce emotional bias and improve decision-making.
In the example given, after a few days of back-and-forth, the parties agreed on a price of $1,040,000, almost halfway between the opening offers from both sides. This outcome was achieved through effectively defusing the anchor, justifying the counteroffer, and "looking forward and reasoning back" in light of the midpoint rule.
The general contractor came down a little but not enough and offered to make compromises on the scope of the project to reach the desired number. This shows that defusing the anchor effectively can lead to achieving or surpassing the midpoint rule.
The article also provides five bargaining tips for negotiating a contract or agreement with your counterpart. It is adapted from "Anchors Away," first published in the October 2011 issue of Negotiation. By understanding and employing these strategies, you can navigate negotiations with confidence and achieve a fair outcome.
In the realm of business, a strategy for defusing anchors in negotiations includes forcefully rejecting an unfeasible proposal to prevent premature narrowing of the negotiation range, as demonstrated by a small business owner. To defend against anchoring, one needs to recognize its presence, a concept explained by Professor Guhan Subramanian, a faculty member at the Program on Negotiation at Harvard University. A key tactic in defusing anchors is employing silence after an aggressive offer, which creates discomfort and encourages the other party to reconsider or soften their anchor. Additionally, preparation is crucial in any negotiation, with thorough research, range offers, and taking breaks to reflect helping reduce emotional bias, ground counteroffers in factual information, and ultimately achieve a fair outcome.
