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Why is it important to plan for concessions?
The bargaining range in a negotiation is established by the parties’ initial offer and response. The parties must first seek to narrow the bargaining range to within the zone of potential agreement (ZOPA). The concession is a tactical tool that brings the parties together. One or more of the parties must make concessions to bring the bargaining range within the ZOPA. Generally, both parties will make some form of concession. Making concessions is a strong negotiation tactic. A skilled negotiator will manage the timing, frequency, and magnitude of concessions in an effort to influence the other party. For example, used effectively, concessions can create perceptions and help to reveal or uncover critical information about from the counterparty. This might include information about one’s interests, resistance point, the costs associated with the negotiation, etc. The back and forth and progression of concessions between the parties sets the tone of the negotiation and can evoke or alter perceptions and create emotions. To further illustrate, making small, frequent concessions can indicate hard-ball tactics that cause a perception of procedural unfairness that alienates the other party. Large, infrequent concessions may frustrate or anger the other party with regard to the pace of the negotiations. The appropriate tactic with regard to concessions will vary based upon the ability of a party to invoke a desired response or elicit information from the other party. The most important thing to remember is that concessions are the only method of arriving at a mutually acceptable outcome. Unless the other party is willing to adjust her reservation point, one party must continue to make concessions until the negotiation point moves beyond the other party’s reservation point. Making concessions is also a sign of procedural fairness to the other party.
• Note: There are also many tactics to avoid when making concessions. Most notably, a party should not make premature concessions. This normally involves making more than one concession in a row before the counter-party responds or counteroffers. Also, a party will have to determine the point in the negotiation to make a final offer or commit to a position without further negotiation.
• Discussion: What factors do you think are important when considering what concessions to make? Why do you think concessions have such a powerful impact on the other party? Can you think of an example where a negotiation has failed simply because of a party’s willingness to make concessions? Can you think of a scenario where a party used concessions poorly?