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Bar News - October 18, 2017

Alternative Dispute Resolution: How to Negotiate to Their Bottom Line, Not Yours


When people prepare to negotiate – whether in direct negotiation or through a mediator – they often spend hours on the factual, legal and economic issues. How much time do they spend on their actual negotiation strategy? Usually no more than 10-15 minutes.

When they begin an interaction, most negotiators have only two or three things in mind relating to their bargaining strategy: 1) where they plan to begin; 2) where they hope to end up; and 3) if they have one - their bottom line. Between their opening offer and the conclusion of their encounter, many negotiators “wing it,” thinking of the interaction as wholly unstructured and mostly reactionary; “They did this so I’ll do that.”

But regardless of how it may appear, negotiation should be a very intentional process that goes through phases, beginning with thorough preparation of the lawyer and the client. Space does not permit a complete discussion of the various phases and all of the issues, but the following concepts can quickly improve your negotiation outcomes.

Calculating Bottom Lines

After lawyers become familiar with the relevant factual and legal matters affecting their own side, they must determine their bottom line – i.e., their Best Alternative to a Negotiated Agreement (BATNA). What are the best results they could realistically hope to obtain through other channels? By determining that, they can decide whether the deal being offered is better than the alternatives available by not reaching an agreement. For example, in a litigated matter, the alternatives may include trial, arbitration, or settlement with some but not all parties. In a business negotiation, alternatives could include not doing a deal, dealing with another party, etc.

Once lawyers have determined their own side’s BATNA, they often think they are done. But this ignores an equally critical part of the preliminary equation – their opponent’s expected bottom line.

Lawyers must ascertain, to the degree they can before they begin to directly negotiate, the needs and interests of their adversaries. This will allow them to predict the items they want that are of minimal importance to the other side, and which terms the other side wants that are not valued by their own client. They must also attempt to determine the alternatives available to the other side if no agreement is achieved through the current negotiations.

Agreements are reached when there is an overlap between the two bottom lines. To use a very simple auto accident example, assume the plaintiff in a case evaluates her bottom line at 80 and estimates that the other side’s bottom line is 100. The overlap (settlement zone) is therefore estimated to be between 80 (what her client would take) and 100 (what the carrier would pay). It is usually more complicated, and there are often other factors in addition to money, but the best negotiators get as close as they can to the other side’s bottom line, not to their own. This will not happen if you focus on your bottom line rather than your opponent’s.

BATNA is Not Enough: Setting an Aspirational Level

Your bottom line (BATNA) does not equal success – it equals “good enough.” What would success look like? What is the most you could reasonably hope to obtain when everything goes your way? That should be a lawyer’s aspirational level. This possible outcome should directly drive the opening demand or offer. You should also estimate your opponent’s aspirational level.

Formulating Elevated but Principled Opening Offers

To have any hope of achieving your aspirational level, your opening demand or offer should leave you room to move. Otherwise, instead of working toward your aspirational level, you will quickly find yourself approaching your bottom line.

Some lawyers begin negotiations with modest proposals hoping to generate reciprocal behavior by their opponents. Although outrageous offers can stymie successful negotiations, opening offers that are overly generous to adversaries are also likely to backfire – due to the impact of a psychological phenomenon known as “anchoring.”

When people receive better offers than they anticipated, they question their own preliminary assessments and increase their own aspirational levels. They expect to obtain more beneficial results than they initially thought possible, and they make initial offers or demands more favorable to their own side.

When you make your initial demand, you generally want to make the largest demand you can make with a straight face. Develop principled rationales you can use to explain how you arrived at your stated position.

Litigators should carefully explain the exact basis for their demands or offers. How have they valued the past and expected future medical expenses and compensation loses? How have they valued the pain and suffering? Transactional bargainers should do the same thing. How have they valued the real property, building and equipment, accounts receivable, patents and trademarks, good will, etc.?

The development of specific values for each of the components to be discussed, supported by logical explanations, demonstrates a firm commitment to the overall positions being articulated. It also makes it more difficult for opponents to dismiss such positions without carefully considering the supporting rationales. A principled opening offer often allows the initiating party to accomplish one other important objective – it may enable that party to define the bargaining agenda.

Be Patient

When lawyers and clients get close to their settlement zone, there is often a change in attitude. They mentally relax, anticipating the settlement. This is a time when you can unwittingly give up more than necessary. Remain vigilant until you are sure the other side has gone as close to its bottom line as possible. Remember, it’s about getting them to their bottom line, not yours.

John Garvey

John Garvey is a mediator, arbitrator, professor of law and director of the Daniel Webster Scholar Honors Program at UNH School of Law. He is the lead author of Alternative Dispute Resolution: Negotiation, Mediation, Collaborative Law and Arbitration.

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