In this post I am going to discuss why you should forget a bottom line in your next negotiation and embrace the concept of a resistance point. In my post about ZOPA or the Zone of Potential Agreement, I explain the concept of a range where the parties are willing to settle. The boundary of this range is bracketed by each parties Resistance Point.
What is a Resistance Point?
A Resistance Point denotes a point after which you are going to resist the deal. As Hanycz, Farrow and Zemans (2008) noted that a resistance point is not a point where a deal would make the negotiator (or client) happy; it is the boundary point where the deal would make the negotiator take and live with the deal.
Why a Resistance point?
Setting a resistance point is more than just picking a number. It should be set by considering how the position reflects your underlying interests. A resistance point is also flexible. There is information that can be revealed or value that can be added that may overcome your resistance point in negotiations. In fact during the negotiations your resistance point should be reviewed as information gets added from your other. Just as your BATNA (Best Alternative to a Negotiated Agreement) is constantly developing your resistance point should reflect your BATNA.
Put another way: You should not agree to less value in a negotiation than you can achieve without an agreement.
Why Avoid Bottom Lines?
Bottom lines in negotiation often denote a hard nosed approach to distributive bargaining. Most people in western culture are conditioned from a very young age to stick to their bottom line and structure their negotiations around that minimum. The trouble with this construction is that the position of the bottom line becomes wrapped up in ego and pride. This conflating of our pride with our position can foreclose opportunities to identify ways to create value.
How to change the range:
It seems obvious that one of your jobs as a negotiator should include attempts to add value or information that moves the resistance point of your other; if you’re doing it right it will usually move to increase the ZOPA.
Ways to move your other’s Resistance Point:
- Objective valuation information
- Add more value
- Consider timelines
Industry standard resources like the blue book value or a manufacture suggested retail price are set independently of your negotiation and may cause movement in a resistance point. This information can also include things like termination pay databases and even outlier cases.
A marginally acceptable deal may become a worthwhile if it is the start of something more. Look for ways to build in future value that benefits all sides.
Fast or slow, most people have a preference. Changing your timelines can help adjust your other’s resistance point.
Above I noted that the general idea is to increase the ZOPA. The exception to this is times when a deal would take unfair advantage of the other side. In cases where there is a continuing relationship or a need to maintain reputation this is especially important. The TV show Pawn Stars frequently portrays the pawn brokers looking for objective valuation that drives up the clients expectations and moves their resistance point.
In the clip above the seller starts with a starting price of $8 000 for each of four paintings by Andy Warhol. The seller does not disclose his bottom line or resistance point, but presumably he had seen the show, and his resistance point was not his starting point. An expert provided a valuation higher than the seller’s target price. The pawn dealer then negotiates with that objective truth in mind. This is an example where one side bettered the resistance point of their other in order to maintain their reputation. Of note is that they tempered their estimate of new value with a disclosure about auction fees. This allows them to maximize value and to maintain their standing with clients (and viewers).
Why not push your too far beyond their Resistance Point?
The goal of a negotiation is not to beat the other side. An important consideration when doing a deal is that the terms need to be acceptable enough or they may not be fulfilled. Obviously this may not be a major problem if you are negotiation with a beach vendor for that shark tooth necklace that you should have left back in the 90s, but for most business negotiations continued relationships and your standing in the industry make mutually beneficial deals essential. If the other side walks away and doesn’t live up to their end of the bargain because you didn’t leave enough in the deal for them, you are no further ahead. If you leave the table and your other cautions other potential partners to avoid deals with you, you may end up in a worse position.
This problem is seen with competitive bidding for longer contacts, where a vendor competes on price to get a tender and then is driven into insolvency costing the purchaser money in the long run. A deal that is not viable is not worth investing time in negotiating. When calculating your resistance point consider that a deal at that point would still need to be workable for you. If it is not, then you have picked a resistance point that is too low.
If you’re negotiating an employment contract, settlement or a collective agreement, Wakely Mediation offers a range of solutions from help planning for a negotiation to acting as a chief negotiator. We will work with you to help you get the most out of your deal. Contact us today for a no obligation assessment of how we can help you.