I came across a new (to me) term recently that struck a chord as something I recognised from practice - negotiation anchors.
These can be defined as "an attempt to establish a reference point (anchor) around which a negotiation will revolve".
In a sense these are good things in that they can be pre-planned and organised to provide a structure for any discussion. They could relate to price or contract term or the amount of risk an organisation will take. As I discussed in my last post these can help to manage a negotiation and have everyone on the team in the same place.
However as is often the case such an anchor can also be a trap which exposes what Wikipedia describes as "the common human tendency to rely too heavily on the first piece of information offered". Once the anchor is set there is a natural bias to interpret other information around the anchor. So, for example, an initial price offered in a sense sets the scene for subsequent discussions. It may actually represent far too high a price - more than the service or product is worth. Then any lower offer looks quite reasonable when it may not represent a good deal.
The same would be true of say a limit of liability or a KPI forming part of a service level regime. Any initial offer needs to be treated with care as it establishes a sort of playing field for the discussions which may not be genuinely representative of the parties' respective positions. And once established these negation anchors can be extremely hard to shift. This could result either in one part accepting a poor contractual position which will probably lead to problems later on in the delivery phase, or more likely the negotiation breaking down completely as neither side considers that are achieving what they require.
So anchors may be useful particularly if your contract negotiation ship is drifting towards the rocks and needs some solid reference points, but they need I suggest to be used with care because they may create a false landscape which is difficult to escape from and is not supported by true value or commercial reality.
These can be defined as "an attempt to establish a reference point (anchor) around which a negotiation will revolve".
In a sense these are good things in that they can be pre-planned and organised to provide a structure for any discussion. They could relate to price or contract term or the amount of risk an organisation will take. As I discussed in my last post these can help to manage a negotiation and have everyone on the team in the same place.
However as is often the case such an anchor can also be a trap which exposes what Wikipedia describes as "the common human tendency to rely too heavily on the first piece of information offered". Once the anchor is set there is a natural bias to interpret other information around the anchor. So, for example, an initial price offered in a sense sets the scene for subsequent discussions. It may actually represent far too high a price - more than the service or product is worth. Then any lower offer looks quite reasonable when it may not represent a good deal.
The same would be true of say a limit of liability or a KPI forming part of a service level regime. Any initial offer needs to be treated with care as it establishes a sort of playing field for the discussions which may not be genuinely representative of the parties' respective positions. And once established these negation anchors can be extremely hard to shift. This could result either in one part accepting a poor contractual position which will probably lead to problems later on in the delivery phase, or more likely the negotiation breaking down completely as neither side considers that are achieving what they require.
So anchors may be useful particularly if your contract negotiation ship is drifting towards the rocks and needs some solid reference points, but they need I suggest to be used with care because they may create a false landscape which is difficult to escape from and is not supported by true value or commercial reality.
RSS Feed
