What are the two dilemmas of negotiation?

Skilful negotiators follow these key principles to achieve optimal results.
What are the two dilemmas of negotiation?

When and how to make an offer, when and how much to collaborate or compete, and when and how to listen or speak in negotiations are the top three dilemmas negotiators wrestle with from time to time. Skilful negotiators consider conflicting thoughts, remind themselves of the key principles, and then go on to execute and achieve a majority of their goals.

Here are ways to resolve these dilemmas and negotiate in any facet of business:

Should we make the first offer (propose) or let the other party make the first offer (respond)?

I used to sit tight and wait in the belief the other party's offer would shed light on their goals, preferences, and alternatives and better equip me to handle the negotiation. Then I found experiments showing the anchoring effect. It means the first offer can drop an anchor, impact the other party's idea of the bargaining zone, and set the tone for further exchange.

By making an aggressive first offer, you may increase the other side's sense of satisfaction by giving them opportunities to get you to lower your demands. Also, when the other party lacks information, it is possible they use your first offer to draw conclusions about the value of an item.

Your response to an extreme first offer from the other party might go like this (refer to the assessment process outlined in the graphic "First Offer Strategies"):

Thanks for sharing your first offer with us. We know your side has put thought into this.

As you might imagine, we too spent time prior to today's meeting on what might meet our interests and, I am afraid, that represents a very different viewpoint on value than what you have offered.

Rather than zeroing in on a number this early, shall we discuss and agree on the various standards and methodologies that might be appropriate in arriving at the valuation that might work for both of us? Does that sound reasonable?

What are the two dilemmas of negotiation?

What if the other party makes an extreme first offer with a view to anchor?

  • Don't feel obligated to promptly counteroffer. Diagnose their offer's legitimacy and demonstrate why it is not acceptable.
  • If the relationship is important, keep them engaged and maintain rapport even as you cast off the anchor.
  • This may be the time to make a counteroffer that is nonpositional and backed with justification.

When should we claim value (compete) and when do we create value (collaborate)? How much?

Creating value means enlarging, to the optimal extent possible, the total value to be divided between the parties. Claiming value means making sure that the final agreement generates an acceptable amount of value for your side, and you leave something for the other party.

Creating new value improves both parties' outcomes. However, having created new value, negotiators must still claim their share of the resulting larger pie. The primary tools to create value include:

  • Building trust and sharing information.
  • Asking questions and listening well.
  • Disclosing information incrementally, back and forth, with reciprocity. This minimises your own risks. If the other party is still reluctant to discuss, you can decide to hold back as well.
  • Focusing on the underlying interests of the parties. Why do they want what they want? I've repeatedly (in varied circumstances, in business and in life) realised that when we dig beneath seemingly incompatible positions, we can discover reconcilable underlying interests and pave the way to resolve conflicts and create value.
  • Negotiating multiple issues simultaneously. Multiple issues allow for creative options to concede things that you do not value highly but are valued highly by the other side and vice-versa (called negotiating tradeables). Say receiving early payment is important for the seller, while the buyer, who has a good cash flow, is more focused on lower price. This is a chance to dovetail opposing interests and create value.
  • Making multiple package offers of equivalent value simultaneously. The other party's response will help you understand how they value different elements of the offers.
  • Leveraging the power of contingent contracts. With a contingent contract, differences of opinion about future events don't have to be bridged. They become the core of the agreement. Parties bet on the future rather than argue about it. In an M&A deal, payment by way of earnout is a contingent consideration (a potential future payment) promised to the seller upon the achievement of specific milestones (say achieving specific profitability or turnover targets). The purpose of the earnout is to bridge the valuation gap.

There are two things to be careful about during the process of creating value:

  • As far as is possible, do not reveal your reservation point (bottom line) since the other party has no incentive to offer you anything beyond that.
  • Never precisely specify your trade-offs among issues, while being truthful about discussing the relative importance of issues.

To claim value in a negotiation, you use competitive tactics to try to convince the other side:

  • Start high, ie, high initial demand (not absurdly high, though).
  • Concede slowly and make progressively smaller concessions to signal increasing resistance.
  • Exaggerate the value of your concessions and minimise the value of the other's concessions.
  • Frame your terms of offer, highlighting what is in it for them.
  • Set deadlines (that you intend to keep) and use decisive language to move things forward.
  • Research and estimate their best alternative to a negotiated agreement (BATNA) and reservation terms (also called a walkaway point). These are not static and will keep evolving.
  • Be willing to outwait your opponent.

Should we listen or should we talk?

Negotiation is not about talking. Successful negotiators listen well and listen more than they talk.

  • Have a genuine interest in the other person and their problems.
  • Listen and ask good questions. Experienced sales trainers have said that a good salesperson talks no more than 30% of the sales process.
  • Listen not just for what is being said but also for what is left unsaid, and what might be behind the words.
  • Calm down any team member who talks too much and tries to fill in silence.

Training, such as role-playing, helps people gain negotiation skills and strategies and acquire the right conceptual framework and practice to conduct successful negotiations more consistently.

Raju Venkataraman, FCMA, CGMA, is a negotiation skills trainer and credentialed leadership and career coach (PCC) based in Singapore, serving clients worldwide. To comment on this article or to suggest an idea for another article, contact Sabine Vollmer, an FM magazine senior editor, at .

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There are two common perspectives on negotiation that can seem at odds, leaving negotiators to decide between these options. But one way around this negotiator’s dilemma is through multiple equivalent simultaneous offers, or MESOs. 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 MESO negotiation.

Making Multiple Equivalent Simultaneous Offers

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 Multiple Equivalent Simultaneous Offers 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 multiple equivalent simultaneous offers 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 multiple equivalent simultaneous offers 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 multiple equivalent simultaneous offers 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 multiple equivalent simultaneous offers.

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.

What’s your experience with negotiating with multiple equivalent simultaneous offers?