As negotiators we are always on edge when we enter into a negotiation. There are a host of questions that are running through our mind and we are searching for ways to be successful. One of the biggest questions that we deal with has to do with the first offer that is going to be made during the negotiations. Should we use our negotiation styles and negotiating techniques to be the ones who make it or should we sit back and wait for the other side? If we do make an offer, should it be a strong offer or do we risk alienating the other side?
In A Negotiation, Who Should Make The First Offer?
So here’s a big question that every negotiator has had to deal with: should you make the first offer in a negotiation? Let’s make it just a little bit more complicated, what should you do if you are in a multi-issue negotiation? These aren’t trivial questions. It turns out that the negotiator who makes the first offer can powerfully anchor the discussion in their favor, research has found. In fact, the first offer can account for between 50% and 85% of the variance in a negotiation’s final outcome. Wait a minute – an overly aggressive first offer can lead to an impasse, and it’s risky to make the first offer when you have little knowledge about the bargaining range.
Research has supported the value of making the first offer in distributive negotiations. These are single-issue negotiations, such as the price of a new car. However, research on whether and how to make the first offer in integrative negotiations has been less conclusive. These are the type of multi-issue negotiations that are common in the business world, such as a purchasing deal or an employment negotiation. In a study that was done, insight is provided to help you maximize first offers in integrative negotiations.
First Offers When There Are Multiple Issues Being Negotiated
Negotiators often are advised to reveal their priorities across issues to the other side, as such revelations can lead to the discovery of mutually beneficial tradeoffs. Should negotiators reveal their priorities across issues in their opening offers? The answer to this question may sometimes be no. The strategy of revealing one’s priorities to identify tradeoffs could backfire if deployed at the very beginning of a negotiation.
It turns out that social motives can matter in a negotiation. Experiments that were conducted revealed that negotiators were dealing with a proself counterpart, they achieved worse outcomes when their first offers revealed their priorities across issues and better outcomes when they did not reveal their priorities. In contrast, when dealing with prosocial counterparts, negotiators who made the first offer claimed more value whether or not they revealed their priorities. What this means is that negotiators who made the first offer but did not reveal their priorities did better across the board than those who did not make the first offer. However, when first movers revealed their priorities, proself negotiators took advantage of this information; prosocial negotiators did not.
So where does all of this leave us? Overall, results of the study suggest that it’s wise to make the first offer in integrative negotiations. However, you may want to wait to reveal your priorities across those issues until later in the process, particularly if you are negotiating with someone who you believe has little concern about your outcomes. In contrast, if you are negotiating with someone who you believe is unlikely to exploit you and who wants you to get a good deal, you should feel more comfortable identifying your priorities in your first offer with the hope of pinpointing mutually beneficial tradeoffs.
What All Of This Means For You
Negotiators need to know how to handle a variety of different negotiating situations. One of the key questions that every negotiator needs to be able to answer is if they should be the ones who will be making the first offer in their next principled negotiation. The answer to this question can become more complicated when we add in the situation in which there are multiple issues being negotiated.
Traditionally, research has shown that it is in a negotiator’s own best interests to make the first offer. This provides us with an opportunity to anchor the ensuing debate. However, when there are multiple issues being negotiated, the question of if we should reveal our priorities to the other side comes up. Generally the guidance is that we should. However, studies have been conducted that show the other side’s outlook could matter. If they are only focused on what they can get out of the negotiations, then we should not reveal our priorities. If they are willing to think about our needs, then we can reveal them.
What all of this reveals is that as negotiators it is important for us to make sure that we have a good understanding of the other side. We need to understand what they are hoping to get out of this negotiation and also how they view us. If they are willing to work with us, then our behavior needs to adjust to allow them to be successful. If they are only thinking about themselves, then we have to limit the amount of information that we will be willing to share with them.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™
Question For You: Do you think that the other side can change positions during the course of a negotiation?
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What We’ll Be Talking About Next Time
Let’s face it: none of us go into a negotiation wanting to share our information with the other side. We view the information that we have as being the key to our ability to get a good deal. If we share too much, then our chances of getting the deal that we want probably go away. However, a negotiation no matter what negotiation styles or negotiating techniques you are using, is all about sharing information and if we want the other side to share with us, then we’re probably going to have to share with them. What should we share and how should we go about sharing it?