1: Imagine we are preparing for an important negotiation.
Do we make the initial offer or encourage the other side to do so?
Yesterday, we looked at FBI hostage negotiator Chris Voss’s advice: Refrain from making the first offer in a financial negotiation.
If we do so, there is a possibility we will leave money on the table. “I’ve experienced many negotiations when the other party’s first offer was higher than the closing figure I had in mind,” Chris writes.
That said, when we let the other side make the first offer, we must guard against “anchoring” around that number, especially if it’s an extremely low offer. Called the “anchor and adjustment” effect, we are predisposed to make adjustments from the initial reference point.
2: There is, however, a third option in any negotiation: Put forward a range.
“When confronted with naming our terms or price, counter by recalling a similar deal which establishes our ‘ballpark,'” Chris writes, “albeit the best possible ballpark we wish to be in.”
Chris references a study done at Columbia Business School where “psychologists found that job applicants who named a range received significantly higher overall salaries than those who offered a number, especially if . . . the low number in the range was what they actually wanted.”
For example, rather than saying, “I’m worth $60,000,” we might say, “At top places like X Corp., people in this job get between $60,000 and $75,000.”
3: Chris has one final suggestion regarding financial negotiations: “Some numbers appear more immovable than others.”
Numbers ending in 0 feel like “temporary placeholders,” he writes, “guesstimates that you can easily be negotiated off of.”
Using precise odd numbers—say, $37,263—”feels like a figure that you came to as a result of thoughtful calculation. Such numbers feel serious and permanent to our counterpart,” he writes. We are wise to use this approach to fortify our position.
More tomorrow!
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Reflection: Think back on a recent negotiation. Did I make the first offer or encourage the other side to do so? What happened? What did I learn?
Action: Journal my answers to the questions above. Apply the learnings.
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