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The “Principled” Demand or Counter-Offer: A Better Method of Negotiation

June 7, 2016

Monetary negotiation technique in mediation is “easy”.  Many would say, “boring”, “mindless” or even “dull”.

If  your routine mediation monetary negotiation is predominantly your repetitive exchange of sequentially smaller (or larger) incremental numbers, painfully dragged out over your allotted total time for formal mediation and eventually, hopefully, successfully closing the initial  monetary gap between offeror and offeree, it certainly may seem so.

And, many active mediation participants will resist suggestions of any change to technique that “they have always used with success”.

But, has that technique really been THAT successful?  Few parties ever accept after a failed mediation that sometimes it was their method of negotiating, alone, that killed their mediation!

Mere incremental offers/counter-offers, or even occasionally bracketing numbers, in slowly closing the opening offer/counter-0ffer gap between parties, without also specific attention and overt connection to the issues, facts, law and practical considerations of the dispute, is, often at the least, wasteful of your negotiation time.

At its worst, it is a major actual cause of formal mediation failure.

Too often, this “one size fits all” technique, instead of solving the dispute,  instead actually adds to the dispute tension by wasted time, mediation-killing frustration and terminal resentment in parties and their counsel and for their dashed preconceptions of the anticipated efficiency of the mediation process.

Effective negotiation takes effort and advance planning.   See, ‘Mediation Negotiation Technique:  Create a Negotiation Plan.”  October 16, 2012

And, successful negotiation requires specific strategy and explanation.  It does NOT require wasted time.  it does not require posturing.  It is also certainly NOT simply two sides with opposing end-goal numbers “slowly moving monetarily toward each other” until they (hopefully) meet!

And, yet, too many mediation negotiations default into this over-used technique trap.  Sometimes because of one side; sometimes, all sides.  Sometimes only in mindless “retaliation”!

The most common beginning is the misplacement of parties’ initial negotiation positions.  This initial error is then frequently followed in multiple wasted “small step” efforts solely because of those unreasonable initial positions!

i. e., A clearly excessive “demand” is met by a woefully inadequate counter-offer.  Both sides know their initial positions are unreasonable; worse, both sides fail to objectively relate their own specific beginning positions to fact or law of their dispute.

Often, unless challenged by their Mediator, both sides will then continue their initial error by simply “reacting” to their opposing side’s “ridiculous” positions, rather to their dispute.  Neither side seems to be able to stop this wasted exchange.  Mediator’s suggestions to return to issues are ignored.  The flawed technique often spirals into one of a contest of posturing, not in finding of grounds for dispute agreement.

All mediating counsel believe they know well the alleged “messaging” intent of this kind of “contest” negotiation.  But, do they really?  Why even start it?   And, is this messaging useful or damaging?  Are low-ball offers to the high-ball demands (or vice-versa) really even necessary at all?

And, even if a useful/common technique, on occasion, for experienced mediation participants, what about the majority of lay participants who have never experienced a mediation?  Many “new-comers” see all opening negotiations as their predictor for their ultimate result;

And the beginning of negotiation often foretells its ending!

A Better Method:

Effective negotiation requires thought and reasoning and purpose.  And, consideration of the goals of all sides to any negotiation process.  And, the ability to convey not only an offer or counter-offer, but to be prepared to also fully explain every incremental change should be the real goal of negotiation. (Too many “demands” and initial offers are seemingly made based solely upon unspoken/unexplained symbolism:  i.e.  Conveying a “potentially large verdict” or responding to a “ridiculous” demand, etc.)

Recently I saw an article referring to a “principled offer” or, as I interpreted the term:  an offer that included not only the conveyance of a offer-number but contained with it  a detailed explanation of the actual basis of the offer and the reasoning behind it.

How much time is wasted in mediation negotiation with offers or counter-offers that not only have no reasonable relationship to the reality of the dispute, but are known by the makers, in advance, to be completely unacceptable when made.

Why do we waste this time?  Why should not every offer have some merit?

I have previously suggested the use of the Verdict Form in monetary disputes as a guideline for all sides to any litigation as a starting point for planned negotiation.   See, “Mediation Negotiation:  One Reliable Method to Evaluate Personal Injury Damages”,  December 8, 2013.  It should be useful for the claimant; but it is equally useful to any defendant.

At some early point in every mediation I also believe that comparing any side’s ongoing negotiation position with the ultimate potential verdict is critical to test their negotiations.  Most verdicts, for money, set forth with specificity, the elements of the dollar damages sought.

I think these verdict elements of damages are, thus, the obvious basis for every “principled demand/offer”; and also becomes the reasoned explanation of why and where your position falls within the reasonable range of any actually potential verdict in your dispute.

In short, why waste time with an opening mediation “demand” or an offer in response to a demand/offer, that clearly has no basis in fact or law or the most likely verdict in your dispute?

For example, what prepared claimant’s counsel would propose a “demand/offer to settle” that is obviously greater than any possible verdict that could be obtained by the claimant?  Why waste your time and credibility?  Why would your opponent ever pay more than some future jury or judge?  Do you really believe your opposition has not done their own verdict evaluation?

And, equally, what possible purpose for any prepared defense counsel does it serve for ANY offer that is literally less than special damages the opposition will certainly obtain in a verdict?

And yet, both nonsensical positions are all-too-common negotiation practices that are clearly a total waste of time.  And, of the negotiation credibility which is so vital to mediation success.  See, “Learning Mediation Negotiation Technique: First, Personal and Professional Credibility”, August 23, 2012.

To the direct contrary, I submit, any PRINCIPLED offer or demand, would totally avoid such unsubstantiated nonsense.  Such a demand or such an offer would be accompanied with a REAL, objectively reasoned position that clearly explains the basis of the proposal.

In short, every offer that, although not a “best position”, at least is one that could be accepted!  And, particularly if a reasonable explanation accompanied the offer!

As a mediator, paid by the hour, I am more than willing to sit and watch “wastes of time”.  And, I respect the experience of every negotiator.   However, when such known aggravated negotiation techniques become the REASON that the mediation fails, it is hard to remain mute.

And, at the least, it then becomes the duty of the Mediator to at least try to change the direction of the negotiations.

As a Florida “facilitative” mediator,  I rarely attempt to change the parties own ultimate evaluations.  I respect their superior position to know their own case.  However, once sound values have been placed upon the opposing final positions, I think it is my duty to help each side “package” those final positions.

In your next mediation negotiation, please at least try principled negotiation.  Convey only “acceptable’ offers with your explanations that really have a basis in your dispute.   And, do it early.

Even better, let your Mediator help you package all of your valid positions with this reasoned basis.

Principled demands and offers will lead to the same end-result at mediation as “business as usual” negotiations; but, in far less time, with less expense and far less angst.

More importantly, they will end successfully far more often .

Dan, from Melbourne, Florida.

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