Who Opens First?
One school of thought is "Never Open First". Experience shows that the "Never Open First" approach is too simplistic and promotes tactics over strategy to your disadvantage.
Why does it matter?
The valid concern about opening first is that you will give the other side information about your strategy that will allow them to alter their position before you know what it was. But a conclusion that therefore you should never open first is overly simplistic. In a typical negotiation we are rarely engaged in a single-issue negotiation, so opening first on one issue does not impact the larger negotiation. Also, because the parties will seek to resolve interests, not just bargain over positions, who opens first is less likely to matter.
Is the decision to open first within your control?
Sometimes yes, but it can also be out of your control:
- You received a Request for Proposal (RFP); thus you are compelled to make a first offer.
- The other side jumps in and while discovering interests, makes the first offer.
- You are competing in an on-line auction without a view of others' bids.
- Industry standard, i.e., in some countries, real estate sales where the property is offered at a certain price; in retail where there are price tags on the merchandise.
Research from the Universities of Duke, Michigan and Houston looked at the anxiety levels of negotiators prior to bargaining, and those same negotiators' economic results after bargaining. The research showed that negotiators who make the first offer tend to undergo more stress and anxiety, but also tend to achieve better economic results. This research supports the proposition that opening first often secures a better outcome, but only if the negotiator is confident and doesn't allow his or her anxiety to sabotage the opening offer.
If the decision is within your control, consider these circumstances and factors:
When you want them to open first
|Let the other side open first when
You lack information to estimate their MDO or Least Acceptable Agreement (LAA)
|Their opening will validate or invalidate your data and assumptions (i.e., be your first notion of what the market will bear for a new product or service not yet market tested)
|Unsure of your MDO
Unable to assess a reasonable, defensible MDO for your team.
|Like a first impression, it is difficult to change their perception about your opening position. Beware, however, that you don’t allow their MDO to Anchor you (see below).
|Anxious about opening first
|If you are a novice negotiator or are stressed about the idea of opening first, ask them what they think is fair. If it’s even better than you wanted, ask a few questions and make a counteroffer. If it’s worse than you wanted, show disappointment, ask questions, and let them know what you had expected so that negotiations take off from your offer, and not theirs.
|Cultural expectations matter
|You will lose more in the negotiation by disrupting their cultural expectation than by abiding by it.
- Never second-guess your MDO if theirs is more aggressive than you expected. This is a tactic called Anchoring where the other side tries to start the bargaining at an unreasonable position so that it appears they gave more in the negotiation. Stand your ground at your MDO, and exercise BNPs 13 through 19 to regain control.
When do you prefer to open first?
|You open first when
|Well informed and equivalent strengths
The negotiators are experienced and sophisticated, and a great deal of information is known by both sides about each other (standards, leverage, options)
|Opening first allows you to lead the agenda and control the tempo
|Better informed and more leverage
You have better information and stronger leverage than the other side, and there are some issues that for you are non-negotiable
|Opening first allows you to apply your standards to measure requirements and outcomes
|Detailed written terms
The offer is not about one or two issues, but will be a detailed agreement with many issues, specifications, and other technical requirements
|Opening first allows your document to be the working draft of the negotiations
|Certainty of other party’s LAA
If you are relatively certain of your counterpart’s LAA, opening first allows you to anchor just beyond it.
|You can maximize your gain without seeming unreasonable.
|The other side won’t
The other side is “old school” and believes that “he who speaks first loses”, but you know that it is not he who speaks first who loses, but he who speaks without preparing who loses
|BNP 5: Keep things positive. Opening first allows you to keep things positive at minimal risk, and besides, you have a well-thought-out MDO to protect you
They are likely to be unreasonably aggressive, and will “low-ball/high-ball” to gain advantage
|You can set the Envelope of Reasonability
It doesn’t matter to you who opens first
|The discussion will focus on resolution of interests and the outcome is not likely to be near an opening position
|The other side is anxious
|The other side feels uncomfortable and fears that they will lose, so you can actually win favor by making the first move