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Play Nice!

Published: Nov 24 , 2016
Author: Alan Smith


Two questions:

When negotiating, do you want the other side to act reasonably?

And,

Is it a good strategy to be reasonable when negotiating?

Most people will say yes to the first question. It would be crazy not to.

The second however creates a bit more of a dilemma. We are sometimes tempted to go high or low, pad and exaggerate what we really anticipate being able to achieve. Because that is what we should do right?

The problem with going extremely high or low, being unreasonable, is that it encourages the other side to do exactly the same. You start high, they go low, the dance begins, the handbags are placed on the dancefloor, before you eventually converge on a deal that is ‘reasonable’. In the meantime, you have both spent a lot of time, energy and money, and potentially done a lot of harm to what could have been a harmonious relationship.

Would it be to everyone’s advantage to come to the table with a realistic starting position? Not soft, certainly challenging and ambitious, but with a foothold in reality, one that certainly can be explained and the basis understood.

An interesting proposition indeed and one that recently inspired a Final-Offer negotiation challenge by AIG. AIG are an insurance giant. Like many insurance firms they spend billions of pounds involving thousands of cases and often end up in court battles dealing with inefficient settlements. Expensive right.

Also like many insurance companies they build their reputation on trust and fairness. That is why people use them in the first instance. They certainly do not want to overpay on claims, commercial suicide, but it does need its customers to recognise that it wants to do the right thing.

AIG created a final-offer arbitration mechanism to try to speed up dealing with claims. Essentially parties on either side of the claim would make an offer and present them to an arbitrator who would then decide which offer was most fair. That would be the legally binding offer going forward. No splitting the difference or further negotiation.

AIG took the view that if they made an offer that was reasonable and the other side didn’t, theirs’s would be the one that carried the day. They also opined that this would be seen as fair to their important customers and that it would encourage them to come to the table with a reasonable offer in return. Fairness was actually built into the system.

Apparently the system has shown some degree of success.

The challenge for such a methodology in the commercial world is of course who decides what is fair? What margin should your bid be allowed to have built in? How many migrants should be allowed across your borders to protect free trade? What time should you be able to come home, if you tidy your room?

Fairness may just be in the eye of the beholder.

Alan Smith


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Alan Smith

About the author:

Alan Smith
My background is marketing and advertising. After graduating in Economics I entered the agency world to become, at 28, MD of London's largest independent below-the-line marketing provider.

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“When it comes to the qualifications we demand of our president, to start with, we need someone who will take the job seriously.” Michelle Obama. Don’t stop reading - this blog is not about Donald Trump. In the run up to the election of a new Labour Party Leader 4 years ago, the four candidates were invited by LBC radio to quiz each other. You can see the questions to Jeremy Corbyn here. There are two points of note. Firstly, when asked if he wants to be Prime Minister he ducks the question several times, instead referring to the ideological changes he wants to make within the Labour Party. Secondly when asked about his qualifications and experience to be leader of a major political party his answer is objectively underwhelming – before being an MP, he says, he had been a local councillor for 10 years. I don’t think it is difficult to relate those answers in 2015 to the current divided state of the Labour Party.

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