"Insulting" Offers as Opportunities

Molly Klapper’s book Definitive Creative Impasse-Breaking Techniques in Mediation features an insightful and practical contribution by Dwight Golann about “insulting” opening offers or demands.  He suggests why they are made, how they can be conveyed by a mediator, and how they can be converted to useful negotiations.

To start with, Golann notes that “insulting” is more a term of art than the description of an event.  Lawyers and clients may be dismayed by a low-ball offer or a stratospheric demand, but they are seldom literally “insulted.”  Nor does anyone at a bargaining table get paid more to humiliate the counterparty.  Why, then, are “insulting” openers ever made?

TACTICS.  Golann suggests that an extreme opener may be signaling that the party believes that there is either (a) an attractive alternative to agreement or (b) a high likelihood of an exceptionally favorable outcome to the negotiation.  Moreover, the effect of “anchoring” the discussion by offering an absurd first number may be advantageous in unsophisticated bargainers; “the less certain a bargainer is about case value… the more impact a high or low offer will have.”

EMOTIONAL VALUE:  Parties whose attorneys have been unsuccessful in instilling clear-headed calmness during negotiation may need to make an emotion-laden opener.  “I spit upon your offer, ptui!”  That out of the way, the party can settle down to real work.

MISEVALUATION:  The party may mistakenly believe that the “insulting” offer is the apporpriate one.  Thus, an insulting opener may contain a great deal of helpful information for the counterparty seeking to learn the opponent’s actual economic assessment.

CLUNKY BARGAINING DECISIONS:  A lawyer may agree that the value of the case is around $20,000, but insist on opening with $1,100,000 “to show I’m serious” or “to give us room to maneuver.” 

INTERNAL DISAGREEMENT:  When lawyers, accountants, spouses and spiritual advisors all give the client conflicting advice, the result might often be an extreme opener, “so as not to look weak.”

The participation of a sophisticated mediator can reduce the possible damage that extreme openers can wreak on the negotiation process.  Most experienced mediators are familiar with the “reality testing” or “probing” skills brought to bear when trying to save a party from its own missteps.  Golann lists five:

ASK THE REASONING:  What’s your thinking?  How did you pick that number?  Can I share your reasoning with them?

DISCUSS THE LIKELY RESPONSE:  How do you think they will hear that.  How would you hear it if you were they?  How do you think they will respond?  Is that the response you want?  What do you plan to do if they respond that way?  What if they respond differently, what will you do then?

BARGAIN OR ADVISE:  The parties aren’t the only ones who bargain during a mediation.  That number may drive them away; what if we halved it to make sure we stay in business?  What if I tell them what you wanted to start with and why, but say you’ve changed your mind to keep us at the table? What could the other side show you to bring your demand down?

PRIVATE INFORMATION: Just for my understanding, I know you won’t go below a million now, but might you later?  Where do you think they ought to be at this point?

OTHER TOPICS: Let’s set the money aside — what do you think of their assessment of their legal defenses?  Where do you think they’re wrong?  How do you suggest we plant the seed that they may be misevaluating the claim?

Golann also offers some thoughts on how the mediator conveys an extreme opener.

CONTEXT: Lay the groundwork of the offeror’s thinking before conveying the offer itself.

GENERAL NOT SPECIFIC:  They made a very low offer, and are still emotional. Let’s wait a while.

CALL IT WHAT IT IS: They offer $5,000, which is so low it hardly helps.  Do you want to play their game and respond in kind, or play your game and open with something that teaches them something about your estimate of the value of the case and gets us back on track?

PROCESS: Put the accountants together, or the lawyers together, or the consultants together.  “Let’s see what’s driving the disagreement about revenue projections.”  Golann points out that this is also code for, cut the b__ s__.

Once we remember that an “insulting opener” is, at its core, either a tactic or an error, then we can defuse its potential for harm and shift the process away from personal vindictiveness and back to solving the problem.

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