Four Strategies for Making Concessions in Negotiation

Iv strategies for building goodwill and reciprocity in negotiation

Past — on / Daily, Negotiation Skills

negotiation

Skilled negotiators know that making strategic concessions at the right fourth dimension tin be an effective tactic in a negotiation. In this article, Deepak Malhotra, a professor at Harvard Business School and PON-affiliated faculty member, suggests four ways to make your concessions work to your best reward.

ane. Label Your Concessions

In negotiation, don't assume that your actions volition speak for themselves. Your counterparts will be motivated to overlook, ignore, or downplay your concessions. Why? To avoid the potent social obligation to reciprocate. As a result, it is your responsibility to characterization your concessions and brand them salient to the other party—a responsibility that the manufacturer in the introductory instance neglected.

When it comes to labeling, there are a few rules to follow. First, let it be known that what you take given up (or what you have stopped demanding) is costly to you. Past doing so, y'all analyze that a concession was, in fact, made. For instance, the manufacturer could have explained the consequence of a three percent wage increase on his business firm'south bottom line or discussed how difficult it would be for him to justify it to his lath of directors.

Second, emphasize the benefits to the other side. My own inquiry suggests that negotiators reciprocate concessions based on the benefits they receive, while tending to ignore how much others are sacrificing. One way for the manufacturer to highlight the benefits he was providing to the marriage would be to dissimilarity his offering with those made by similar firms (assuming they were lower).

Tertiary, don't surrender on your original demands too hastily. If the other side considers your start offer to exist frivolous, your willingness to motion away from it volition non exist seen as concessionary behavior. Past dissimilarity, your concessions will be more powerful when your counterpart views your initial demands every bit serious and reasonable. Accordingly, spend time legitimating your original offering so use it as a reference point when labeling your concession. The manufacturer, for example, would have been wise to make concessions slowly. Eventually, he could point out that his final offer was closer to the union'due south original demands than it was to his ain.

two. Need And Define Reciprocity

Labeling your concessions helps trigger an obligation to reciprocate, merely sometimes your counterpart will be irksome to human action on that obligation. To increase the likelihood that you become something in return for your concession, try to explicitly—but diplomatically—demand reciprocity.

For example, consider the post-obit negotiation between an IT services house and a client. The client suggests that the Information technology firm's cost estimates are unreasonably high; the IT firm's project manager believes that the price estimates are accurate (and perhaps bourgeois) given the complexity of the project and the short borderline. If the project manager is willing to make a concession, she might say: "This isn't easy for united states of america, but we've fabricated some adjustments on price to accommodate your concerns. Nosotros wait that you are now in a amend position to brand some changes to the projection deadlines. An extra month for each milestone would help us immeasurably."

Discover that this statement achieves 3 goals. Outset, it labels the concession ("This isn't easy for u.s.a., but we've made some adjustments …"). 2d, information technology tactfully demands reciprocity ("We expect that you lot are at present in a ameliorate position to make some changes …"). Tertiary, it also begins to define the precise grade that reciprocity should take ("An extra calendar month for each milestone… "). While each of these elements is critical, negotiators often overlook the need to define reciprocity. Recall that no ane understands what you value better than you do. If y'all don't speak up, you lot're going to become what your counterpart thinks you value or, worse, what is most convenient for your counterpart to give.

The strategy of demanding and defining reciprocity plays out in a diverseness of contexts; those who empathise how to employ it can profit from it immensely. A great instance is a tactic consultants and contractors use. When a client praises her piece of work, a smart consultant volition quickly point out that the person who would really love to hear this praise is her dominate (or other potential customers). In this fashion, she defines for the beholden client how best to reciprocate.

iii. Make Contingent Concessions

One hallmark of a skilful working relationship is that parties don't nickel-and-dime each other for concessions. Rather, each side learns well-nigh the interests and concerns of the other and makes good-faith efforts toward achieving joint gains.

Unfortunately, while fostering such norms is desirable, it is not always possible. Recently, one of my students in an executive education class explained that while he would be more than happy to engage in common word during his negotiations, he often has trouble doing and so with his contractors and customers. Some are clearly untrustworthy or entirely cocky-interested. Such negotiators are probable to exploit his goodwill by refusing to reciprocate at all, much less in the way he has defined.

My advice to the executive: When trust is depression or when you lot're engaged in a ane-shot negotiation, consider making contingent concessions. A concession is contingent when you state that you tin can make it merely if the other party agrees to make a specified concession in return. For example, if the executive was renegotiating a service contract with a customer, he might suggest that a requested concession is impossible given the current contract but possible under sure conditions. He might say, "We can provide additional support but only if you concord to purchase some of the following additional services," or, "This is literally the best nosotros tin practise on price right now. But if y'all can adjust some of your demands, we might be able to reopen the price result."

Contingent concessions are almost run a risk-gratis. They allow yous to signal to the other political party that while you have room to brand more concessions, it may exist incommunicable for you to budge if reciprocity is non guaranteed. Continue in heed, even so, that an over-reliance on contingent concessions can interfere with building trust. If y'all need immediate compensation every time you make a concession, your behavior will be seen every bit self-serving rather than oriented toward achieving mutual satisfaction.

4. Make Concessions In Installments

Which of these scenarios would make you happier?

Scenario A:

While walking downwardly the street, you lot detect a $20 bill.

Scenario B:

While walking down the street, yous observe a $x nib. The next day, on a different street, you find some other $x pecker.

The total amount of coin found is the same in each scenario—notwithstanding the vast majority of people report that Scenario B would make them happier. More more often than not, extensive research (beginning with the work of the late Stanford University professor Amos Tversky and the Princeton University professor and Nobel laureate Daniel Kahneman in the 1970s) demonstrates that while most of us prefer to get bad news all at one time, nosotros adopt to get expert news in installments.

This finding suggests that the aforementioned concession will exist more positively received if it is cleaved into installments. For case, imagine that y'all are negotiating the buy of a firm and that a broad gap exists between your initial offer and the seller'south asking price. You are willing to increase your offer by a maximum of $forty,000. You will be more effective if you make ii smaller concessions, such as $30,000 followed by $10,000, than if yous make one $twoscore,000 concession.

There are other reasons to make concessions in installments. Get-go, near negotiators expect that they will trade offers back and along several times, with each side making multiple concessions before the deal is done. If you requite away everything in your first offering, the other party may retrieve that you're belongings back even though you've been every bit generous as yous tin can exist. The manufacturer who offered a 3 percent wage increase to the employees' union up front faced exactly this problem.

Installments may also atomic number 82 you to discover that you don't have to make as large a concession as you lot thought. When you requite abroad a little at a time, you might get everything you want in return before using up your entire concession-making capacity. Whatever is left over is yours to go along—or to use to induce further reciprocity. In the existent estate instance, you might discover that the initial $30,000 increase in your offer was all that you needed to sign the deal!

Finally, making multiple, small concessions tells the other political party that you are flexible and willing to listen to his needs. Each time you brand a concession, you have the opportunity to label information technology and extract goodwill in return.

All of the above strategies are aimed at guaranteeing that the concessions you brand are non ignored or exploited. It is important to notation, even so, that when someone refuses to reciprocate, the refusal ofttimes hurts her as much equally the party who fabricated the concession. Nonreciprocity sours the human relationship, making it difficult for negotiators to trust each other or take chances further concessions. Thus, effective negotiators ensure not only that their own concessions are reciprocated simply also that they acknowledge and reciprocate the concessions of others.

How practice you make concessions in a negotiation? Get out a comment.

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