Consider the following two perspectives on negotiation:
- Following the finalization of a new trade agreement among Canada, Mexico, and the United States, Enrique Peña Nieto, then the president of Mexico, said on September 3, 2018, that the agreement “achieves what we proposed at the start: a win-win-win deal.”
- On July 1, 2019, U.S. president Donald Trump told reporters at the Oval Office that renewed trade negotiations with China, which collapsed in May, would need to result in “a deal that is somewhat tilted to our advantage” because China has had a trade surplus over the United States for many years, according to CNBC.
In the former case, Peña Nieto expressed a view of negotiation as a cooperative enterprise in which it is possible for all parties to get what they want.
“Value creators” focus on pursuing joint gains through creative problem solving—by openly sharing information, brainstorming, and identifying opportunities for tradeoffs, write David A. Lax and James K. Sebenius in their classic book The Manager as Negotiator: Bargaining for Cooperation and Competitive Gain (Free Press, 1986).
In the latter case, Trump depicted negotiation as a competitive exercise in which the ultimate goal is to get a better deal than one’s opponent. “Value claimers” such as Trump focus on beating the other party by aiming high, making minimal (if any) concessions, guarding information, and at times threatening, ridiculing, or intimidating their adversaries to get their way.
Who’s right, the creators or the claimers? Neither, according to many negotiation experts. Each perspective is “incomplete and inadequate” because “value creating and claiming are linked parts of negotiation,” according to Lax and Sebenius. Negotiators who create lots of value but don’t try to claim that surplus for themselves come up short. And negotiators who focus only on dividing the value that’s immediately apparent squander opportunities to create more value to claim.
In most negotiations, to get a great deal, you need to be successful at creating and claiming value. Unfortunately, most of us aren’t naturally skilled at doing both. The negotiator’s dilemma, a term used by Lax and Sebenius and others, describes the inherent tension between using cooperative and competitive tactics in negotiation. The question of whether to share information about your deeper interests and priorities epitomizes this tension: If you share this information to create value, the other party may try to take advantage of you. If you conceal this information, you are likely to leave value on the table or reach an impasse.
So, how can we manage the negotiator’s dilemma—creating value without risking exploitation, and claiming value without jeopardizing the relationship? Negotiation theorists and researchers have identified several effective strategies. (See the sidebar below.) Here, we focus on a strategy that new research has identified as an effective means of claiming and creating value: making multiple, equivalent simultaneous offers, or MESOs.
First offers are a common trigger of destructive competition in negotiation. As many negotiators are aware, even an extreme or arbitrary first offer tends to pull counteroffers in its direction. Fearful of being taken advantage of, offer recipients often devalue their counterpart’s first offer, make aggressive counteroffers that are likely to be rejected, or walk away from the bargaining table. As such, first offers often get a negotiation off to a competitive start and stall or block the process of value creation.
To minimize this aspect of the negotiator’s dilemma, rather than just making one offer, we should give our counterparts a choice between two or more package offers that we value equally, University of Toronto professor Geoffrey J. Leonardelli and his colleagues recommend in a new study published in the journal Organizational Behavior and Human Decision Processes.
Take the example of a hiring manager who is preparing to make a job offer to a prized candidate. Through their discussions, three main issues have emerged as ripe for negotiation: salary (they haven’t discussed salary, but the manager would like to stay under $110,000); telecommuting (the candidate has asked to work from home up to three days a week, but the manager would like him in the office more often); and contract duration (the candidate wants a one-year contract, but the company has asked for a three-year contract). Limiting the number of telecommuting days is the manager’s top priority; she isn’t sure which issue the candidate values most.
Rather than presenting a single package or negotiating the issues one by one, the manager might put together three packages, such as the following, and ask the candidate to choose among them:
- Package A: $100,000; one remote workday per week; three-year contract
- Package B: $95,000; one remote workday per week; two-year contract
- Package C: $90,000; two remote workdays per week; one-year contract
Note that the manager values each package equally—if the candidate chose any one of them without negotiating further, she would be very pleased. Moreover, all three offers are fairly aggressive on the issue of telecommuting, the manager’s main concern; however, Package C does give the candidate room to try to negotiate for three remote workdays per week in exchange for a lower salary.
Suppose the candidate responds to the three offers by saying he likes Package B best but that the salary is too low. This choice makes it clear that he is flexible on remote workdays and contract duration, and more concerned about salary. The parties can then bargain further on salary and are more likely to reach a mutually beneficial agreement than if they negotiated a single offer.
Why do MESOs work?
In their experiments, Leonardelli and his colleagues paired up study participants for negotiation simulations. One party either made a single-package offer or made two or three multiple, equivalent simultaneous package offers; the other party then made a counteroffer. As predicted, those making the first offer got a better deal when they offered MESOs than when they made a single-package offer. Recipients viewed counterparts who offered MESOs as more cooperative than those who made just one offer, suggesting that MESOs produce relational benefits in addition to economic benefits for the offerer. Notably, however, the recipients of first- offer MESOs gained slightly less than recipients of a single first offer.
Why were MESOs so effective for offerers? Because recipients of MESOs believed their counterparts were making sincere attempts to accommodate their interests. As a result, recipients’ counteroffers were less aggressive in response to MESOs than to single- package offers. In fact, this effect was even more pronounced when offers were extreme. That is, MESOs had the greatest positive effect for offerers when their offers were extreme rather than more moderate.
Overall, the study results showed that MESOs lessen the negotiator’s dilemma for offer recipients by allowing them to believe they are claiming value for themselves while simultaneously accommodating their counterpart’s interests. However, recipients of MESOs need to be aware that they are more susceptible to being anchored by MESOs than by single offers.
Giving your counterpart a choice of options communicates goodwill, doesn’t require any sacrifices on your part, and is likely to secure you a better deal than making a single offer. How many packages should you offer? In Leonardelli’s study, offerers achieved similar benefits whether they offered two or three packages. Offering many more packages could trigger “choice overload,” overwhelming your counterpart with an excess of options and eliminating the benefits of MESOs.
3 more strategies for mitigating the negotiator’s dilemma
1. Enlist the help of a neutral third party. While professional mediators typically assist parties in conflict, they also can be enormously helpful in dealmaking negotiations, according to Northwestern School of Law professor emeritus Stephen Goldberg. In particular, mediators can facilitate the exchange of useful information by being careful not to pass on information the other party might exploit, note David Lax and James Sebenius. Mediators can further reduce the odds that one party will take advantage by presenting the other party’s proposals as their own.
2. Try a single negotiating text. Almost a year before the start of the 2015 Paris climate change negotiations, the facilitators created a draft “single negotiating text” and invited the nearly 200 participating nations to add to and criticize it. Over several rounds, the facilitators incorporated changes, released new drafts, and invited debate. A single negotiating text can improve cooperation by eliminating the need for parties to commit to concessions up front, note Lax and Sebenius. As a result, negotiators often stick with the process long after they might have been deadlocked in a traditional negotiation. In preparation for a committee meeting, a facilitator might circulate a draft agreement to members before their first meeting. The facilitator would then incorporate comments, revise the document, and present it at the next meeting, repeating the process until everyone endorses the text.
3. Suggest a post-settlement settlement. If you suspect a recently concluded negotiation could have created more value, you might consider proposing what the late negotiation pioneer Howard Raiffa termed a post-settlement settlement—a new deal that’s reached after your initial agreement is signed and in the drawer. Start by acknowledging your accomplishment and then suggest there might be room for improvement. If the other party agrees, propose that you brainstorm ways to improve your deal—and explain that you would change the agreement only if both parties want to, recommend Deepak Malhotra and Max H. Bazerman in their book Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond (Bantam, 2007). Because you’ve already reached an acceptable deal, a post-settlement settlement process can reduce competition and promote outside-the-box thinking.