Let’s say you’re sitting at your desk Monday morning, your telephone rings, and it’s Jane, opposing counsel in one of your cases, calling to see if you might be interested in discussing the offer she e-mailed you last week. Because you’re mostly up-to-speed on it, you jump right in.
What just happened? You — like thousands of lawyers in countless negotiations every day — just made a common negotiation mistake even the most experienced lawyers consistently make. Who has the advantage here? Jane. Why? You agreed to speak with Jane before you had strategically prepared.
Here’s what you should have said: “I’m right in the middle of something. Can I get back with you shortly?” Then you should have strategically prepared.
The fact is, lawyers negotiate constantly. Whether you’re trying to settle a lawsuit or attempting to close a merger, you’re negotiating. Yet relatively few lawyers have ever learned the strategies and techniques of effective negotiation. Instead, most lawyers negotiate instinctively or intuitively. It’s natural. It can also be devastating.
To avoid this mistake and others — and to strategically negotiate and thus increase your ability to get what you and your clients want, follow my Five Golden Rules of Negotiation.
1. Information is Power — So Get It!Self-described “expert” lawyer-negotiators often enter negotiations with arguments intended to persuade the other side of the legitimacy of their positions. Unknowingly, they’re giving up power from the first time they open their mouths. Negotiation power goes to those who listen and learn. It’s thus critical to ask questions and get as much relevant information as you can throughout the negotiation process. With information in your pocket, you have power. Without it, you ’ll be scrambling.
Effective lawyer-negotiators know this well. Instead of trying to convince the other side of the strength of their case or why the other side should agree to the merger, they start by getting information. How? By building rapport, developing relationships, asking questions (especially open-ended ones like what, how and why), finding out their counterparts’ negotiation reputations, and probing their and the other sides’ fundamental goals, needs, interests and options.
2. Maximize Your LeverageHow much does your client want or need that deal or settlement, and how much does your client’s counterpart need it? What are your and their client’s alternatives if an agreement is not reached? What can you and your client do to strengthen your leverage? What might your counterparts be doing? Finding the answers to these leverage questions can be the key to success. Ignoring them can be a recipe for failure.
Maximizing leverage can be especially challenging for litigators. Why? They must, in effect, simultaneously send two seemingly inconsistent signals.
On the one hand, they should convey to opposing counsel that they are ready, willing and able to take the case all the way through trial. After all, most litigators’ best alternative to settling the case — a critical element of leverage — is trying it. And the higher the likelihood of their winning at trial, the stronger their negotiation leverage.
Yet over 95 percent of litigation matters settle. So litigators must also signal an interest in settling. But the more they signal an interest in settling (and thus not trying their case), the weaker their leverage.
So how can litigators credibly send both signals? Pursue each on parallel tracks in the following way. On the litigation track, always push forward to trial in an appropriately aggressive fashion.
On the settlement track, get the other side to initiate the process (thus signaling their relatively strong interest in settling), or suggest that it’s your policy in all your cases to discuss settlement at that stage of the matter (signaling that you do it then in your strong and weak cases, and avoid sending the “We’re interested in settling because we have a weak case” message).
3. Employ “Fair” Objective CriteriaThe quest for fairness and the perception of fairness are key elements in many legal negotiations. Fairness, in most instances, boils down to a matter of relatively objective standards, like market value, precedent, efficiency or expert opinion. If both sides can agree on a fair and reasonable standard, many negotiations will be successful. If not, it ’s far more difficult to reach agreement.
For transactional lawyers, standards can play an especially crucial role. Why? Because many transactions involve parties with future relationships, and standards can provide an independent and objective view of the issues. This can depersonalize the negotiation and help preserve their relationships.
“The reason my client’s purchase price and terms are fair and reasonable,” you might suggest, “is because they are in line with the market and they are the equivalent of what it paid last year for a similar company, factoring in inflation and the unique elements of your client’s business.” Or “it’s standard in the industry for the losing party to pay attorneys’ fees if a future dispute goes to arbitration.”
Focus on standards. While applicable also for litigators (critical standards include jury verdict research, expert opinions and precedent), it can be an especially powerful move in many transactional contexts. And it will give you credibility and help keep that “fair and reasonable” hat on your head – a critical factor in many legal negotiations.
4. Design an Offer-Concession StrategyNo one wants to leave valuable items on the table gratuitously. The best way to avoid this is to design the right offer-concession strategy. Doing this will require you to understand the psychological dynamics underlying concession behavior, as well as improve your ability to evaluate your counterpart’s “flinch” point. It’s not an exact science, but you can learn to draw out and recognize certain signals that will give you the edge in your negotiations.
A crucial offer-concession element in the legal arena involves making sure your counterpart walks away feeling like they achieved a good deal. How can you make sure of this?
Build in sufficient “room to move” with your offers so your counterpart will feel like they received a decent result. How often have you left a negotiation feeling you achieved a good deal based on how far you were able to get the other side to move? “I know we negotiated a great deal when we settled that lawsuit,” you might say, “because John increased his offer by $100,000 and we only moved down $35,000.” This is common.
So don’t just start at one point and refuse to move. Instead, start more aggressively and make some significant moves. Provide them with the ability to walk away feeling like they negotiated a decent result
5. Control the AgendaEffectively managing the negotiation process — overtly or covertly — is one of the most challenging elements in striking the perfect deal or settlement, even for the most expert negotiators. Understanding when to use deadlines, how to effectively operate within them, and the psychological tendencies underlying them will give you a leg up in your negotiations.
Controlling the agenda can make or break your negotiation. Early in my career, I set up an appointment for an hour with a prospective client and arrived promptly at our scheduled time. She kept me waiting for 30 minutes, and then escorted me to a conference room where she told me she was running late and that I had 15 minutes to explain what I could provide to her and my fee. “Cut to the chase,” she told me.
I did. And it was a mistake. I should have said “Wait a second. Before we discuss my fee, why don’t you tell me what you want, why and how you think we might be able to help each other? Then we can discuss the value I add, which provides the basis for my fee. And if we run out of time, I’ll be happy to come back or put together a written proposal for you based on your needs, what we’ve discussed and include my fee.”
In short, control the agenda. And if your counterpart tries to control the agenda, negotiate it. Not in an overly aggressive way. But in a way that satisfies both parties’ interests.
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Experienced lawyers often tell me they wish they had been exposed to the strategic elements of the negotiation process earlier in their careers. “Just think of the difference it could have made,” they say.
My response? “Experience does not equal expertise in negotiations. It’s never too late to learn and improve.” Remember that before your next negotiation.