In the “Cascade Manor” negotiation, I played the role of co-chief city planner. I was part of a team, partnered with the other co-chief city planner and the city’s financial director. It was our task to negotiate a deal with a development corporation who wanted to build a residential housing community to revitalize the historic district of our city. We devised a strategy on how we would open and negotiate on the issues. Using this strategy we were able to agree to a deal with the developers, and walk away with a sizeable amount of the “pie”. This paper will look at how offering multiple package deals help the negotiator claim resources, and suggests ideas on how to develop an effective multiple offer strategy.
Thompson (2004) lists package deals and making simultaneous multiple offers as a good strategy for win-win negotiations. Constructing package deals avoids the mistake of single issue negotiation, which makes trade-offs difficult, impasse more likely, and “lure negotiators into compromise agreements” (Thompson, 2004).
By developing a good package, a negotiator can also ensure that he/she claims resources while expanding the pie. For example, in our negotiation we decided that attaining the maximum number of local contractors was an important issue to us with regards to claiming. If we decided to negotiate that single issue, we would have definitely failed because we were bargaining for the maximum amount. If we asked for the maximum amount, the negotiated amount would end up being somewhere in between the maximum amount they were willing to concede and the minimum amount we were willing to accept.
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In order to achieve the maximum number of local contractors, we created a packaged offer that included allowing the developer to build to their maximum height. The height issue was of far less financial importance to the city, than use of local contractors. However we suspected that height was very important to the developers because it allowed for more occupants, which translates into more paying tenants. Packaging allowed us to claim much more financially, than we would have if each issue (local contractors and height) were negotiated separately.
There are five benefits to making multiple offers in a negotiation (Thompson, 2004).
The first benefit is the ability to aggressively anchor the negotiation by being the first to offer. Second, using multiple offers allows the negotiator to gain better information about the other side by observing the reactions to each offer. Next, having multiple offers allows the negotiator to be more persistent. He/She does not have to waste time working on a new offer if the first is rejected. Another benefit relates to the persuasive power gained regarding the value of the offer. The other side is more likely to believe in the value of your deal if they know you have taken the time to create multiple offers. Finally, providing multiple offers to the other party allows them to “overcome concession aversion”, which means that by providing choices they are more likely to come to an agreement.
I believe another benefit from employing multiple offers in negotiation relates to the aspect of claiming resources. Developing multiple offers encourages negotiators to use some of the 10 basic strategies to improve claiming (pie-slicing) discussed by Thompson (2004).
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For example, two of the strategies say that a negotiator should “set high aspirations” and “make the first offer.” By using a multiple offer approach, a negotiator can include an offer that aims high on all the issues, and use this offer as the initial offer to anchor the negotiation. For example, in the “Cascade Manor” simulation, one of our offers was focused on getting the maximum amount of money possible. We used this offer as our opening anchor point, fully expecting a rejection. Afterwards, we followed up by simultaneously submitting two more offers that asked for less, but that actually contained much of what we really wanted in the first place. In addition, planning to concede on some issues and attempting to be fair are also good resource claiming strategies. Negotiators use both of these strategies when developing multiple offers. For instance, we knew that we needed to make concessions to the development corporation in order for them to agree to a deal. By developing our multiple package offers we were forced to decide which issues we were willing to concede on for each package. Having these concessions included in each offer also made us appear to be fair to the other side.
According to Thompson (2004) there are three parts to the multiple offer strategy: create multiple packaged offers (i.e. more than one issue in each offer), make sure each offer is equal in value to you, and submit all the offers at the same time. After working through the “Cascade Manor” simulation, I would only agree to one of these strategic points. It is crucial, when claiming resources, that negotiators create multiple package offers, instead of multiple single issue offers for reasons discussed previously. However, I would disagree that each package must be of equal value and all made at the same time.
I found that our strategy of having one offer that went for the most financial gain on all issues, and offering this as our first single offer, was a good way for us to figure out what the other side valued the most. For example, one of the issues concerned who the building inspector should be. While we were laying out the issues of our first offer, I noticed that they had a positive reaction when we stated who we wanted as inspector, which was a clue that this was possibly a compatible issue. The opposite was also true, we could tell which issues hurt them the most financially, and could use this information for deciding what issue(s) to use for possible trade-offs. I think if all the offers were equal in value and submitted at the same time, we may not have figured out the compatible issues as easily.
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Instead of the three part strategy for multiple offers discussed by Thompson (2004), I would suggest a six part strategy. First, create an opening packaged offer that is composed of the most profitable choice for each issue. If an issue has no set limits, then choose a maximum amount that is within reason for that issue. Second, carefully analyze each issue as if you were the other side. The purpose of this is to decide which issues you can concede on that more valuable to the other party than they are to you, i.e. the building height issue previously discussed. Next, create at least two packages of equal value that contain the most profitable choices on half of the issues. Lower your profit on the remaining issues, which are those you previously decided to concede on. The fourth step involves meeting with the other party and submitting your opening package. If possible, read aloud your offer for each issue in the package.
Carefully observe the other party’s reaction as you read. The purpose here is to try and “read” the other side, looking for clues to compatible and incompatible issues. Next, after they have rejected your first offer, submit your equal value offers all at the same time. Since these offers are lower than your first, you have already made the first move of the “negotiation dance” (Thompson, 2004).
Finally, be prepared to make changes to your equal value offers, but make sure the changes are trade-offs so the overall value does not change. In the end, you should be able to come to a win-win agreement in which you have claimed a sizeable amount of the pie.
References
Thompson, L. (2004).
The Mind and Heart of the Negotiator, 3rd Edition.
