Adapted from “Option Overload? Manage the Choices on the Table,” by Chris Guthrie (professor, Vanderbilt University Law School), first published in the Negotiation newsletter.
Consider what happened when Randy, who was opening his first restaurant, met with Albert, the general manager of Best Appliances, to negotiate a deal. Albert pulled out a stack of brochures and began expounding on the relative attributes and prices of nine different walk-ins and eight different freezers. In addition to negotiating a cash price, he explained, he could also finance the purchase, lease the equipment, or even trade some of it for a stake in Randy’s business. “And before I forget, I’ve got one-year, three-year, and five-year warranties, as well as the following delivery and installation deals…”
Overwhelmed, Randy left the meeting feeling incapable of making any decisions at all.
Whether shopping for a new TV, choosing between retirement plans, or weighing proposals from different suppliers, we’ve all been in Randy’s shoes. It’s common for decision makers faced with multiple options to have difficulty making choices. Furthermore, a surplus of options can lead us to make irrational decisions and to experience post-decision dissatisfaction and regret.
How can you capture the benefits of multiple options in a complex negotiation without falling prey to these common shortcuts and mistakes? Here are four guidelines:
1. Be aware. Most writing on negotiation uncritically advises you to generate as many options as possible. You’ll be ahead of the game if you understand that with the added benefits of increased options come added costs, such as difficulty reaching decisions, making decisions that do not reflect your underlying preferences, and post-decision regret. When weighing multiple options, take time to consider whether you are oversimplifying the decision process, focusing too much on negative attributes, or being distracted by irrelevant options.
2. Play negotiation offense. You can also use your awareness of these phenomena to obtain better deals. Suppose, for example, that you are a wine retailer trying to unload a case of high-end cabernet. A prospective buyer is debating between the cabernet and a case of chardonnay. If you bring out a less attractive case of red wine as another option, you are more likely to induce your customer to choose the high-end red over the white.
3. Develop a scoring system. In the article “Do You Know How Much You Really Care?” in the June 2005 issue of the Negotiation newsletter, researcher Don Moore recommends putting together a scoring system that will help you weigh options, manage tradeoffs, and make sound decisions. To create your scoring system, Moore advises the following: (1) list the issues that are likely to come up, (2) list the options available within each issue, (3) assign point or dollar values to each option based on its worth or desirability to you, and (4) compute and compare the overall value of the various packages you’ve identified. Then be prepared to adjust these scores once talks commence.
4. Retain an agent. You might choose to minimize the costs of weighing multiple options by retaining an agent with specialized expertise and skills to negotiate for you. Agents are likely to have greater emotional distance from the substance of a negotiation than you do—distance that can enable them to make more rational decisions. Research by Chris Guthrie of Vanderbilt University Law School suggests that lawyers are more likely than their clients to evaluate options rationally and analytically. But agents make flawed decisions, too, so be sure to monitor their work.