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Anchors Away!

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03/12/2012 02:30 PM

Last week I ended by acknowledging, though not dealing with, the idea that when all parties to a negotiation understand the basic "Dance" that they can change their offers in a way to get them a better deal.  Continuing with last week's juvenile participants, once Joe offers Betty $1 for the candy bar, Betty might think, well whatever I offer the final deal will likely be in the middle.  So Betty would offer $10 hoping to get $5.50 instead of $3.  On the otherside, if Joe is the savy one, he will offer really low, like five cents.  This is Anchoring.  

Anchoring in negotiation is establishing a certain point (figure, range, issue, etc.) as the focus of the negotiation.  Much like a good sailor establishes a firm point at sea by dropping a big heavy anchor.  The idea is that by bring the negotiation's focus onto a certain point or range, the human tendency to fix attention on a point and be influenced by its suggestion allows the anchoring party to shift the negotiation in the direction they desire.  Where the anchoring party is hoping to gain an advantage is by focusing the other party(ies) to an available piece of information or suggesting an acceptable offer range whether it is accurate or not.   So as much as the waves try to move that ship, a good anchor is going to keep it steady.

Ready to drop that anchor sailor?  Not so fast.  One negotiation strategy that is oft recommended (wise or not) is to not make the opening offer, because if you do then the other party has the advantage.  Our young negotiation savvants are an example: It appears that Joe, being the first to offer, has a disadvantage and Betty has the advantage in the dance.  Regardless of what Joe offers, Betty's counter can be changed to ensure she gets what she wants.  So Joe offers five cents, Betty offers $11 and the likely deal/mid point is still about $5.50.  

So drop, don't drop????  Before you drop that anchor on your foot due to our indecision, let's consider two things.  First, anchoring does not necessarily have to be the first/opening offer of the parties.  Joe can respond with what he thinks will achieve anchoring by making his concessions much smaller, such as going from 5 to 10 cents.  This sends the signal to Betty that Joe is really focused on keeping the cost under a dollar.  That may be true, it may not.  Joe may be willing to pay $6.00 for the candy bar, he is simply anchoring to get the best value he can.

The second thing to consider is that any offer, whether in the strategy of anchoring or not, if it is too extreme or appears unreasonable then the technique and the negotiaton likely will not achieve the desired result and may kill the whole deal.  In such a situation, the other party(ies) are likely to think an agreement is not possible and no agreement or resolution will be reached.  Thus, for anchoring and the dance to work, you need to be "in the zone".

The anchor is up, but let's hang onto the anchor for a time before we are ready to plunge it down.  We'll now head out to sea and try to find "the zone" for effective anchor dropping. . . . 

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