Improve Your Negotiations With The 5 Golden Rules.   LEARN THEM

“It came down to $10,000, and this was a small amount relative to the size of the deal. But there was some ego involved, and we both wanted it,” this client told me.

“What did you do?” I asked.

“We flipped a coin, with the winner taking the $10,000.”

Was this a good idea? Absolutely. These parties found a way to take their egos out of the equation and did it by picking a process they both agreed would end up with a fair result.

Sometimes, when parties can’t seem to bridge the gap between their positions, they reach an impasse and must find another way to reach an acceptable result. In those circumstances, or even if you just believe the more traditional give-and-take negotiation will not be productive, consider the following procedures:

One cuts, the other chooses. Let’s say two teenagers, Mike and Shari, both want the last piece of apple pie. One way they can fairly resolve their dispute is for Shari to cut the piece in half and Mike to choose his half. Or, Mike cuts and Shari chooses. Either way, they both likely will find this procedure leads to a fair result.

This “one cut, the other choose” mechanism often is used in real estate partnership disputes.

For instance, two friends of mine jointly bought a condominium in Manhattan Beach in the early 1990s. After a few years, one of them decided to live with his girlfriend. While there was space for three, my friends decided that wouldn’t make sense.

But they couldn’t decide who would move and how much the remaining person would pay for the “mover’s” share. Neither cared too much about who stayed or left.

Here’s what they did. They agreed that one would decide the amount each share was worth. The other would then decide whether to stay and pay that share to the person moving out, or move and have that amount paid to him.

Both agreed this process would lead to a fair result.

Take turns. Divorce lawyers often use this procedure in determining how to split the household belongings from a marriage.

First, they make a list of all the items to be split, then flip a coin to determine who gets first choice. The spouses then choose alternately until all the items are gone.

In this way, each spouse can decide how much he or she wants an item and assign his/her own relative value to it.

Many professional sports also use a variation of this, the draft, to allow their member teams to select the top amateur players wishing to move up to their level.

Ask a third party to decide, like an expert or arbitrator. Assume two siblings, Lisa and John, inherit equal shares of their family’s privately held software business when their parents unexpectedly pass away. But only John wants the business. Lisa wants to cash out to start a furniture business.

How might they agree on the value of Lisa’s share? They might hire a business valuation appraiser, ask him to value the business, and agree that John will pay Lisa her proportionate share.

Alternatively, if they can’t decide on one valuation expert, they might each select an expert, have those two experts select a third, and have the three experts assess the business’ value.

Parties also might just agree to hire an independent third party, an arbitrator, to resolve their dispute.

Major league baseball uses a variation of this, final-offer arbitration, in salary disputes where the parties have reached an impasse.

There, each party provides the arbitrator with its recommended salary and the arbitrator can only select one. Each party thus has a great incentive to present a figure within a reasonable and objectively supportable range.

Ask an independent third party to mediate. Parties also might hire an independent third party – a mediator – to help them negotiate, but not make the decision.

Often, a skilled mediator can expertly control the agenda and influence the parties’ perceptions in such a way as to increase the likelihood of an agreement.

Advantages and disadvantages of mediation are explored in my April 5 column, “At an impasse, try mediation to resolve tough issues,” which can be accessed at The Business Journal.

Get the other side to offer to split the difference. Finally, parties often resolve relatively small financial differences, especially at the end, by splitting the difference.

As discussed in my Feb. 26, 2001, column, “‘Split the difference’ can translate as ‘lose the edge,’“ this usually only makes sense if you can get the other side to initially offer to split the difference.

Of course, if the amount remaining is minimal, you might just flip a coin.

Published January 7, 2005 The Business Journal

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