Readers of this blog will remember my blog of 14th June where I wrote about the power of standards during negotiations. An article in the current issue of Negotiation Journal (Vol 32 No 2) describes in detail, the potential benefits of a very special type of standard – precedents.
Although precedent is a concept that is very well understood in a legal context, especially in common law jurisdictions, there is relatively little negotiation research on this. As mentioned in the June blog, standards are a form of anchors.
To be able to take advantage of this approach negotiators have to face two challenges. They first have to establish the precedent and make it relevant. Second, they have to apply the precedent and ensure that their counterpart accepts the precedent and its implications as relevant. Precedents share this two folded challenge with all standards.
When one negotiation creates expectations or sets a precedent this can cause a “ripple effect”. Negotiators have to be careful that the ripples they create will not undermine future negotiations. Almost all actions that a negotiator takes can end up becoming a precedent. One example for this is conceding a “major discount”. Clients who have received a discount may not only expect future discounts, but will also insist on them, on the basis of the original discount given. Another common example is “splitting the difference”. Where a negotiator has been known to use this approach a counterpart may well insist on a repeat – naturally only when it suits them.
The use of precedence has other advantages and disadvantages. On the one hand, if the precedent is accepted as objective, fair and appropriate it can help save time and effort. On the other hand, using precedents may get in the way of a more innovative and constructive outcome.
Building strategic precedents
The article describes a number of international trade negotiations and how negotiators were able to create and then apply precedents which significantly influenced subsequent trade negotiations. One example given was a US-Singapore Trade Agreement. The reason given for why the US would spend all the time and effort agreeing such an agreement with a relatively small trading partner was that the US were able to create a favourable precedent that US trade negotiators could use with other countries.
The analogy with PSF fees is fairly direct. There may be times when agreeing a fee with a relatively small or otherwise “unattractive” client may well be worth the effort as it could be held up as proof that the proposed fee is fair and reasonable and reflects market conditions.
Applying and rebuffing strategic precedents
Having created one or more precedents still leaves negotiators with the challenge of presenting the precedent in such a way that their counterpart will accept. The key challenge is the ability to present the precedent as fair and appropriate. Naturally, the more information is given and the more similar the precedent, the more weight it will have.
Those on the receiving end of a precedent gambit have to demonstrate that the precedent(s) presented by the other side are either not relevant, appropriate or that the situation here is different. Best of course is if they can present precedents that supports their own position.
In the end dealing with precedents is like dealing with any other anchor gambit. They have to be recognised and at the same time ignored, in the sense that one has to set one’s own anchor. Strategic negotiators know this and will have set their repertoire of favourable precedents.
