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Negotiation Technique: Bracket Offers, The Good, the Bad, and the Ugly

October 24, 2011

One of the most popular negotiation tools in monetary negotiation during mediation is the use of “brackets” in an offer by one party to another.   This negotiation tool can be quite useful when used properly.  However, its overt and covert meanings and the timeliness of its use must be fully understood and carefully considered prior to its use.

In summary, a bracket offer can be quite good, but it can also turn very bad.  And sometimes its misuse can become downright ugly.

Simply defined,  the use of brackets in negotiation is where one party proposes as their offer that if their opposition will move to a position proposed by that offering party, that the same party-proposer will agree to move their own position to a better point than if they each exchange smaller offers incrementally.

In essence then,  the bracket-proposing party suggests both sides of the next negotiation positions for both sides.  The two new suggested positions for both opposing parties is thus called the  “bracket” of the offer.

For example, where the plaintiff has reached their negotiation position of a $50,000 demand and the defense has countered with their opposition offer of $5,000, it could be said that the existing bracket is now, $50,000 and $5,000.   (The mathematical center or average of these two opposing positions is $27,500, sometimes referred to as the “mid-point”.)

At this point, rather than trading another small incremental addition to their last offer, the defendant might suggest (or alternatively to a small increment, suggest),  “If the plaintiff will agree to “demand” $30,000.00,  the defendant will agree to “offer” $15,000.00.”

Note, that this example bracket-offer by the Defendant, if accepted, requires the Plaintiff to reduce their “demand” by $20,000.  But it also offers to “reward” the Plaintiff for their move by the increase the Defendant’s offer by $10,000.  Equally important to note, however, is that  the “mid-point” is now indicated to be $22,500.

Using this simple example may be helpful in understanding some of the benefits and pitfalls of bracket negotiation.

Why use such bracket offers for one or more steps of mediation negotiation?

Many suggest that the proper use (and timing) of this “bracket negotiation”  can save substantial time.  It does so presumptively by accelerating the more traditional negotiation where each party picks an incremental response to the last offer of the opposition.

In the example, above, each of the parties might alternatively move toward each other at small increments of $2500 or even less, depending upon their internal evaluation of where each side believes negotiation should finally bring them.  Such small moves take time.  And, expending too much time without demonstrable progress can be a real enemy of resolution.

Any savings in time by the use of bracket negotiation thus can be one of the “good”.

A collateral “good”  is that  this increased speed in negotiation is usually a significant positive for keeping the interest and attitudes of the parties toward resolution.

Another “good” is that bracket-offers allow both sides to keep their present position for future negotiations or other trial strategies if their offer of the bracket is not accepted by the opposition.  If it is not accepted, at least the offering party has gained information.  In other words, it can be used in an exploratory fashion, without actually committing to another level of offer.

But, the most important  “good”  most often opined is that the proposed bracket conveys the  unspoken message that the middle/midpoint of the proposed bracket  is likely the location for a total resolution.   Sometimes this is proven accurate, sometimes it is totally without any merit.  And this message unreliability is particularly true with premature brackets.

(Note:  Even though the midpoint of any negotiation is something most mediators and participants often observe, it is actually quite meaningless until firmly established by other negotiation effort.  The real area of potential resolution may not be known by even the mediator until after a period of negotiations and study with the separate parties.  Meanwhile, each of the parties, individually, can only guess.)

Interestingly, the most common response to a bracket-offer is a counter bracket-offer!  And this exchange of proffered midpoints quite naturally can then lead to a critical comparison of unspoken messages of where the opposing parties each see the final range of possible resolution.

But, this same presumed ” critical information” benefit of bracket negotiation is precisely where “poor” bracket use can rapidly become a bad idea.

Brackets convey the “suggestion”  that the resultant midpoint is the direction that the proposing side sees as to the ultimate settlement range or “value” of the claim that day.  In the above example, what is arguably being suggested is that the likely resolution area for the bracket proposal  is a “mid-point”, or $22,500.  This comes about because one side or both may presume that if the bracket is accepted, each side will then simply move, directly or in increments, to the middle or average of the bracket proposed.

The “other information” that is being conveyed in the above hypothetical is that the “midpoint” of the stage immediately before, or $27,500, is presumptively too high.  Still other information that is being proffered is that acceptance means the mid-point (settlement range) is being acceptably decreased!

Where the bracket negotiation (with or without counter-bracket offers) often backfires is when this  “information” suggested, conveyed too early, creates another “fear of failure” attitude and the parties stop trying too early.  It is one thing for a client to gradually accept that their hoped-for pre-mediation position is not going to be accepted after lengthy discussions and considerations of the oppositions positions.  It can be quite another if a previously unacceptable settlement range for pre-mediation is seen as now being “forced” too early in the process and  before the opposition has time to find some acceptance of the basis of an opposing position.

And, another “bad” is that sometimes the very speed gained in bracket offers is then lost in the in-depth analysis that is required of the opposition by any such offer.  In short, the timing and message must be carefully analysed before any wrong response can damage the exiting negotiation.

But where it can then become quite ugly is where one proposing side or the other has no intention of using their midpoint (or anything close) of their bracket for their areas of final resolution.

In essence, expectations purposefully sent, but never intended to be kept, solely to gain an edge.  And if this is believed by the receiving party, good negotiations can then break completely down due to a lost of faith in the oppositions further negotiations.

Another”ugly”?    Misinterpreting the bracket-offer as negotiations return to incremental efforts.

If negotiation fail, both side must be very, very cautious to return solely to their last offer, not to any presumed position arising from any proposed bracket not accepted.  Using the above example, if the Plaintiff does not accept the Defendant’s proposed bracket, the Plaintiff should never presume that the “new” mid-point suggested will automatically be acceptable later to the Defendant.  It may have never been acceptable in the first place!

Personally, I love bracket negotiation.  It allows me as a mediator to avoid the most common criticism of any mediator, the excessive time consumed in small incremental offers and counter-offers.

But, I strongly believe that brackets must be used at the proper time.  Like Goldilocks, too early and the “suggestion” made may be so far off from what the opposition if hoping to hear that the “Fear of Failure” begins to kill the entire mediation process.  Too late and there may be too little time to close a resolution that could have been achieved with more time.  Too little time is the most common reason for formal mediation resolution failure.

I believe, therefore, that it is the Mediator who is in the best position to suggest when the timing of the use of brackets may have their best effect.  The mediator, after all, usually has the best “feel” of where each party sees any possibility of resolution.  And, when the mediator feels the parties are at least close in their respective resolution goals, then brackets may be the perfect tool to save time and the opportunity for resolution by conveying the right messages, timely.

One other note to consider:  Who should INITIATE the original use of brackets?  Although available for initial use by either side to any negotiation, at least one prominent local mediator has strong feelings about who best to initiate.  Attorney Rick Wack, a long-time Winter Park mediator (and a respected mentor of mine), suggested recently at a mediation seminar for new lawyers that only the defense should initiate the use of brackets in negotiation.   Time did not permit him to fully explain the basis of his opinion.  But, presumptively it may be due to the previously noted issues of “too much information” and “bad timing” by the Plaintiff.  If the Defendants, the side writing the check, too early believe that your “ultimate” position signaled is simply outside of their reasoning, the ol’ fear of failure may doom your mediation before it gets started!

In summary, bracket negotiation is an important tool.  It is incumbent, however, on the parties to choose carefully when and how to use such a tool, which can be either good, bad, or ugly.

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4 Comments leave one →
  1. Wack Richard permalink
    October 25, 2011 8:30 pm

    Dan
    Great synopsis about brackets. Thanks for mentioning my name. The reason i think defendants should initiate the bracket is that it gives the plaintiff a ballpark idea of where they are going. Plaintiff can respond with a bracket. If plaintiff goes first and defendant responds, the signal is not clear. Is defendant signaling the mid point of the bracket or the mid point of the mid points? Brackets work magic for me in mediations. Defendants can’t wait too long to offer a bracket because there needs to be a good gap between their last hard number and the bottom number of the bracket. If Plaintiff is at 200k it doesn’t make sense to say “We are at 50k but will go to 55 if Plaintiff drops to 75. The bracket should be made earlier when defendant is at 35 so there is a 20k gap between the two numbers.
    Just my thoughts
    Rick Wack

Trackbacks

  1. Mediation Negotiation: Want a Home run? First, Find the Ballpark! | Honeywell Mediation
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