Negotiating Positionally, Mediating Astutely (F)

*Notes for paper presented at New Zealand Law Society Workshop, 30 September 2016. Not for referencing without author’s permission.

These notes focus on two related topics. The first concerns traditional features and dynamics of those negotiations which are characterised as positional or distributive or competitive in nature – here referred to as positional bargaining - as opposed to interest-based, problem-solving or mutual gains negotiation. The second is on how mediators might use their knowledge, skills and attitudes to develop appropriate interventions when parties and their advisers are engaging in positional bargaining. This can be referred to as the use of ‘soft skills’ in hard bargaining.

I Positional Bargaining – Dynamics and Challenges

Basic features

  • Opening offers – Positional negotiations usually commence with high-soft or low–soft openings which, provided they are not in the ‘insult zone’, provide negotiators with more items of tradeable value. The higher/lower their opening the more likely the point of compromise is to favour the respective party. Where one side opens ‘reasonable firm’ it can cause consternation to others where there is a culture of positional bargaining.

  • After opening offers there is an exchange of incremental offers and counter-offers involving patterns of matching, mismatching, tit-for-tat and game theory. As well as these observable patterns the timing and quantum of offers give clues as to the respective parties’ future intentions and resistance points.

  • The tactics of hard bargaining can involve threats, intimidation, lies, bluffs, tricks and last-minute add-ons, the effectiveness of which will be partly a function of power relations between the parties. Regardless of whether or not there is a settlement these tactics could impact negatively on the parties’ present and future relationships.

  • Positional bargaining ends with either a compromise settlement at some point within the spectrum of the opening offers, or a lack of settlement because each party has reached their resistance point and a compromise cannot be achieved – unless they are shifted out of positional bargaining.

Numbers in Positional Bargaining

Positional bargaining often involves an exchange of numbers between the parties – one of its dimensions is that of swopping numbers. Numbers indicate the relative sizes of different factors and are consistent with rational choice theory. They are also heuristics for keeping the score. Whether it’s the rugby or a mediated settlement, outsiders are less interested in the poetry of the game or the competencies of the mediator, the impasses and breakthroughs, and the pressure of time and others’ expectations – they are impatient to know the figures, the score or settlement number as the case may be. However in the context of negotiations equating numbers with what is greater or lesser than a comparator might not always follow.

Some religious and cultural traditions regard certain numbers as auspicious, or the converse. In the Christian tradition 13 was regarded with superstition and seat numbering in some aircraft went from 12 to 14, as did floor numbers in some buildings. An Asian legend talks about 10 generals contemplating the next move. Three generals wanted to attack and seven to retreat – so they attacked as three is a number of unanimity and harmony. For some Chinese 4 is not an auspicious number because of its association with similar sounding word for death. When Alfa released its 164 model in Taiwan it was surprised by low consumer interest, but when it changed the identical vehicle to a 168 model sales increased dramatically, both there and in Hong Kong. In the 1990s Brisbane City Council resolved to discontinue house numbers ending in 4 and estate agents report significant interest in No 8 residences from specific cultural groups. So some clients in dispute resolution contexts may have special, lucky or unlucky numbers because of their culture or religion or for reasons peculiar to them as individuals.

We currently have a base-10 numbering system, which we take for granted. Computers have binary systems which provide different complexions to quantities - for example comparing a mediated offer of 10011011001001101 with its BATNA of 111001001011001001100.

Despite the rationality assumption behind numbering the rational brain can sometimes be fooled, for example the number 48 can register in the brain as being greater than 51. Marketers know how to persuade us to overlook one item for $13 and prefer three of the kind for $42.

Numbers have other areas of significance for negotiation. They can have an anchoring effect, making it difficult for parties to move too far from the anchor whatever their initial tactics. An anchor is the starting-point number provided by one party which shifts the thought parameters of the other, inducing them to moderate their own starting-point. Kahneman has shown experimentally how even absurd numbers, including those produced by the roll of a dice, can have powerful anchoring effects on subjects. [1]

Numbers can also shift gear from the limbic brain to the neo-cortex. A John Haynes video demonstrated this in a fractious family mediation in which he distracted an emotional parent with the deflective question, ‘How old are the children?’ This kind of intervention should involve a cognitive challenge for the slow brain and not something that can be conducted by the fast brain, for example ‘What year is it?’

Money in Positional Bargaining

Money talk abounds in everyday language - in metaphors, in aphorisms, in jokes and epigrams. As regards negotiations over money a commentator has said:[2]

I have come to believe that disputes about money are fundamentally different from other types of disputes. Claims for money start with positional bargaining, end with positional bargaining, and resist our efforts to reframe them into problem-solving experiences. Settlement negotiations in claims for money are difficult, indeed, because they are dominated by traditional bargaining.

Dostoevsky, while not an accredited mediator, also commented that when the talk turns to money people assume a wholly different persona.

  • In dispute resolution contexts the question arises as to whether money is a position or an interest? The preponderant view is that money is ultimately a position where the underlying needs and interests are factors such as future security, a sense of fairness, purchasing a new house, vindication for being right or punishment for a debtor. In this sense money can never be an ultimate interest. However an intermediate position might be to refer to money as an instrumental interest, for example I want vindication or for this not to happen again, and the money constitutes a symbol of what is right or of punishing the recalcitrant party. While terminological questions over positions and interests can be become a bit moot it is well-accepted that in the throes of bargaining over money underlying interests can be lost in the fog of war.

  • A more significant factor is whether, as economics texts suggest, money is the ultimate in fungible products in the sense that one quantity, as with unleaded petrol or extra virgin olive oil, is the same as another. In concrete terms this $ 20 note is the same as that $20 note, and they are readily exchangeable with each other. However the fungibility assumption might be less valid in negotiation and mediation settings. The notion that one thousand dollars is identical to another thousand can cause negotiators and mediators to be overlook situations in which one amount might assume greater value than other. For example money can be less fungible than is often claimed in the following respects:

  • The source of money – superannuation funds, future earnings (capitalised).

  • The recipients of money – charity, children, family pets.

  • What an amount of money stands for or is attributed to, eg pain and compensation, future economic loss

  • The association of money – a holiday in Fiji, purchase of a franchise

  • Its symbolic value - payment of legal costs, the mediator’s fee

  • The form of money - credit card payment involves a lower loss experience than cash.

Context also changes the value of money, as exemplified in the reactive devaluation effect. Here an amount of money may be regarded as insufficient if received too soon in the bargaining, as the receiver may become concerned that too little was requested or that the granter is privy to knowledge of which they are unaware.

  • The premature discussion of money can be problematic in positional bargaining as too early a monetary discussion can have negative priming effects. Here there is evidence that money’s premature disclosure can make parties operate at high levels of abstraction, become defensive and marginalise non-monetary factors, relegating them to soft or even quirky considerations when they are raised later. The negative priming effect of a premature money framework to negotiation can extend to parties becoming more self-focused and less attuned to others. It can reify business factors at the expense of personal, emotional and relational factors, even contributing to unethical behaviour. However avoiding early mention of money is counter-intuitive in commercial and legal negotiations where participants are motivated to settle quickly and move on.

Dollars in Positional Bargaining

Dollars combine money with numbers and become the standard way of measuring success or failure, both in positional bargaining and elsewhere. The hierarchy provided by dollar numbers provides a heurist for effectiveness. The dollar sign is only a symbol but a significant one associated with value, merit and even personal character – the ‘halo effect’ surrounding those of high value. Somerset Maughan alluded to the dollar symbol as our 6th sense without which others would not work.

However dollar figures can be deceptive. Negotiating parties might see significant difference between $98 K and $100 K as compared to the difference between $20 K and $22 K. However if expressed as percentages the latter difference is an order of magnitude larger than the former. It is understandable why negotiating parties might resist going below, say a six -figure number or going above a certain high-figure number, but in reality the difference between $ 99 500 and $ 100 000 has only a symbolic and not an economic value. This suggests the need to sometimes avoid absolute dollar figures and talk instead of percentages, fractions or proportions

Dollar figures might seem absolute but they are always relative to a comparator. Moreover the human brain always compares, either analytically and unconsciously. This is referred to as choice relativity – the mind finds it easier to assess the value of something if it can be compared to something else. This can be illustrated as follows:

A wants $ 245 K, B cannot go above $235K

B offers $ 230 K, A comes back with $ 245K

B then offers $ 230K or 235K in five monthly instalments

This makes the $ 230 K look better but not necessarily acceptable

Then B offers $ 50K in services and $ 190K cash, $ 240 K in total

This may make the $ 230 K in cash look even better

Variations of this are found in marketing and sales collateral where choice relativity is exploited to unwary consumers’ disadvantage.

There is also a phenomenon that economists call focusing on the margins. In dispute resolution terms this involves negotiators focusing on the final dollar amount in contention, despite its relative insignificance, rather than the larger figure on which there is consensus.

Part II – Mediating Astutely

Mediators might have to work with the realities of positional bargaining where this is the predominant culture or where mediation operates on a shuttle basis. This requires that they add to their management of the process and tool-box of skills and techniques a significant knowledge base. Much of this derives from cognate disciplines - we now all need to have amateur insights into the biology of the brain and into cognitive biases and heuristics in human decision-making. Here mediators can explain factors such as the confirmation bias, the fundamental attribution error or optimistic over-confidence and their impacts on positional bargaining.

Traditional functions associated with mediators’ roles include ensuring adequate preparation by parties and advisers, developing vicariously a sense of trust in the room, providing structure and control in the procedure, facilitating appropriate communications by framing, reframing, questioning and summarising, avoiding predictable negotiation traps, acting as reality agent and bringing encouragement to settle. In addition mediators can attempt to add value in the following ways, each of which involves some shift to interests and needs:

Normalising and labelling

This refers to mediators empowering parties by indicating the normal features of positional bargaining, for example the predictable problem of a last-minute add-on by either party and warning periodically of the importance of bringing all negotiation items onto the table to avoid this predicament. The empowerment through normalising extends throughout the process.

Priming

Mention has been made of the negative priming effect of the premature discussion of money. There can also be positive priming of specific amounts of money, through what is referred to as the anchoring effect or mediators managing unrealistic expectations. Priming also relates to non-monetary factors through mediators’ use of language that is conducive to problem-solving, collaboration and mutual gains.

Conditional linked bargaining

After engaging in issue proliferation to create sub-issues to the dominant issue of quantum (for example, timing of payment, method of payment, etc) the mediator can assist parties to trade off items on a conditional basis to satisfy the interests of each side feeling like a winner on at least some issues, even if less significant than the quantum issue.

Double-blind bidding

Here parties, under mediator supervisions, make three sequential bids in ignorance of each other’s bids. If the gap between them narrows to less than a pre-ordained amount the remaining difference is split. This can satisfy interests of avoiding further argument, neutrality of the process and reduced transaction costs.

Introducing random chance

Tossing a coin or drawing lots is one way of crossing a final negotiation gap. This intervention can satisfy interests of procedural fairness, objectivity, not conceding to the other side, playfulness and finality.

Splitting the difference

This is a hallowed measure which can have strengths, and also potential drawbacks, in positional bargaining. It can satisfy interests of reciprocity in concessions, finality, reduced transaction costs and avoiding the further fog of war.

Auctioning

Here a disputed item in the dissolution of a business partnership could be ‘auctioned’ between the competing parties to satisfy their imperatives for a fair go, equality of procedure and the excitement of a competitive process.

Cost-benefit analysis

This is a traditional approach based on the concept of self-interested rationality of decision-making and assesses an offer on the table with what is likely to transpire away from the negotiation room.

Linking dollars to quantified life goals

This is a more sophisticated cost-benefit arrangement in which current proposals are related to respective parties’ life goals. These are potentially broad-ranging and could include avoiding further uncertainty and anxiety, restoring productivity or health, maintaining privacy and reputation, and generally getting on with life.

Part III – Conclusion

Positional bargaining is a culturally-accepted model of negotiation in many contexts and it has advantages and disadvantages for clients and advisers. Mediator should be adept at assisting such participants to positionally negotiate better through their understanding of the system, its stages and dynamics and the consequences of positional tactics.

Mediators can also modify positional dynamics through changes in mediation process, through skilled interventions and through increasing their knowledge base in the art and science of negotiation. Much of the knowledge comes from cognate disciplines and provides a foundation for mediators to bring interest-based dimensions into what could otherwise be a frustrated positional procedure. While mediators do not bargain against the parties they are in a negotiational relationship with them and need to be the negotiation experts in the room. This allows them to add value by enhancing the effectiveness of all models and styles of negotiation.

See generally Boulle, Goldblatt and Green, Mediation: Skills and Strategies (LexisNexis, Wellington, 2015)

[1] See C Murdock and B Sullivan, ‘What Kahneman Means for Lawyers: Some Reflections on Thinking, Fast and Slow’ (2013) 44 Loyola University Chicago School of Law Journal 1377, 1382-3.

[2] J Anderson Little, Making Money Talk (2007, ABA Dispute Resolution) 5.


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