AT THE HARVARD/ESSEC conference on “New Trends in Negotiation Training,” I had the pleasure of attending a session by Adam Galanski, an assistant professor at Northwestern University’s Kellogg Graduate School of Management. He recalled an interesting study done by Thomas Mussweiler of the Institute of Psychology at the University of Würzburg, Germany.
In this study, researchers went to expert mechanics and asked them to give a professional estimate on the value of a second-hand car. One group of mechanics was told by customers that they felt that the car was worth DM2,800, while another group was told, “I think the car should be sold for around DM5,000.” After their careful inspections, the group that was prompted with the higher price came back with estimates that were DM1,000 higher in average.
Why were these professionals so influenced by the suggestion of a higher value by customers? It’s called the “anchoring” effect. Who ever goes first in a negotiation gets to anchor discussions around the price that they put forward. And in this study, it has been suggested that mechanics given the high anchors focused on the positive attributes of the car, while the ones given lower anchors directed their attention to some of the vehicle’s more negative features.
What does this mean for your deal-making? Often negotiators adopt a “wait and see’ attitude to the first offer, in the fear that they will jeopardize the deal by being too ambitious. In other words, they are not aggressive enough with their initial offers and anchor the negotiation in the other parties favour. The lesson… try to go first and anchor the negotiation with an offer that is unacceptable, but discussable.
How do you determine what that figure is? There’s only one way. Information; either in planning your negotiation or by asking probing questions of the other side. If the other party goes first, even if their offer is acceptable, do not be anxious to accept. Believe me, they will feel better if you hesitate a bit and they are encouraged to give up a few concessions. They will perceive that they are getting more value.
There’s one area where I hesitate to make the first move… salary negotiations. It’s very difficult to come down from a high figure without reducing your own brand-value as an employee. In these cases I recommend that you shift the conversation to the value you intend to bring to the company if you are hired, and that you have full confidence that your package will be in line with your efforts. You should still be very clear on market rates for your services and price your services optimistically AFTER the offer is made. This is when you have the most leverage. The leverage shifts back to the employer once you accept the job, and you will not likely get a better opportunity to increase your salary afterward.
Copyright © 2009 André Bello All Rights Reserved
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