Tuesday, December 9, 2008

Negotiation Capital

In these tough economic times let’s talk about “capital” – not true dollars, but the currency and capital you use in mediation. Think in terms of “negotiation capital.” I’ve coined this phrase to refer not specifically to the dollars that are exchanged in negotiation, but rather how easy or difficult are the steps in the negotiation. Are folks moving in very small steps early on or large steps? Is it taking a very long time between proposals such that one party is becoming impatient with the process? Has the negotiation taken so long that folks are running out of energy to do the really tough work at the end when a gap in the numbers remains? My sense is that for all of these instances, if it takes a long time for the negotiation to get to the end, then once at the end, there is little “capital” left to bridge whatever gap remains.

I routinely explain to folks at mediation of an injury claim (and most litigated claims) that there are two negotiations. The first, from the defendant (institutional) perspective is based on authority given, reserves set, and market value. From the claimant (individual), it is based on their goal for the negotiation, what they want, what their attorney tells them would be an appropriate settlement. When the respective parties get to these points, there usually remains a difference. I call it the “gap.” As you might imagine, if it only takes 4 steps to get to the gap as opposed to 10, then the participants will have more energy and generally more willingness to keep going and figure out how to bridge the gap.

I encourage folks on both sides to move in larger steps early so that the “pressure” to take a step that will be seen as significant is on the opposing side. Generally, the more one side moves, then the more likely they will also get a significant move from the other side. Of course, rarely do folks match moves; however, the main issue is whether the move is perceived as “good” by the receiving side. When I walk in to a caucus, present a proposal and folks say “that was a good step” then they generally try to do the same.

The point is that if you can get to the gap without spending all your negotiation capital, then you will be ready for the hard work ahead. You’ll be ready for the second negotiation, ready to bridge the gap and get the case settled.

In your next negotiation, consider moving in larger steps early and try to put yourself in the other sides shoes – How will they perceive your move? Remember, you can always slow down later if you want/have/need too. Save your negotiation capital for the second negotiation!

Monday, December 1, 2008

The Power of Getting Back Together

In most mediation of litigated cases, the parties and their attorneys (and us mediators) want to get to the private caucus quickly. These caucuses provide a relatively comfortable space to discuss and analyze the case. It’s where we ask attorneys about their BATNA and WATNA – what’s the best and worst that could happen if the case does not settle at mediation. And, if we are doing our job, we also connect with the individual party and learn more about their needs (as opposed to wants). We know that attorneys will not “honestly” evaluate their case in front of the other side, so we don’t ask in general session. Once this analysis by the participants (with the mediators’ facilitation) is complete we switch to a facilitative negotiation. My query to you – is there ever a time short of settlement when we should get folks back together? I believe the answer is a resounding “Yes” and let me demonstrate with a recent case.

The case was a denied workers’ compensation claim and after our general session we moved to caucus. In caucus, it became clear that the injured worker was very interested in a medical evaluation to find out what was wrong with his back. (His first proposal was for a medical evaluation which was declined by defendant.) Since he didn’t know, the uncertainty presented itself in a settlement demand that the defense found out of the ballpark. We still traded some numbers, but things were not moving to quickly and at some point, plaintiff’s counsel again raised the idea of medical care. The way counsel shared it suggested to me that we get back together or at least get the attorney’s and the claims professional together.

So, I asked plaintiff’s counsel if he would come back to the other room and share his idea that a medical evaluation would provide everyone with needed information, i.e., if the evaluation did not show a serious condition needing surgery, then the plaintiff would be better able to settle the case in a range likely acceptable to the defendant. Or, if a serious condition was found, then both sides would know the extent of potential medical care. I brought counsel together with the claims professional; plaintiff explained their idea in a cordial manner and then I split them up again. After some discussion, the defense agreed. We recessed the mediation to allow for a medical evaluation at defendant’s direction. Now, I still don’t know whether the case will eventually settle or not, but it now has a much better chance as compared to the chances last week.

With this recent experience under my belt, I encourage you to think of ways to get folks back together for a specific purpose in your mediation. As I explain in mediation trainings, when you get folks together there is risk and opportunity. As mediator we must set up for opportunity and manage the risk!