I just finished reading a book by J. Anderson Little, Making Money Talk (How to Mediate Insured Claims and Other Monetary Disputes) (ABA Publishing 2007). The book has a lot of practical advice both for mediators and for disputing parties. In simple terms, Mr. Little explains that most disputes which seemingly involve money, in actuality, involve emotions and more particularly, the perception that one is being personally attacked by the other party.
To elucidate this point, Mr. Little (in chapter 6 at pp. 121-185) discusses some often used clich̩s and explains what is really going on. For example, the first one occurs when it is time to start making monetary demands; the question (ie, clich̩ ) arises “who goes first?” Normally, it is the plaintiff that starts. But, as Mr. Little explains, the plaintiff may be reluctant because she does not want to set the upper limit too low. At least in the United States, if one negotiates higher than the previous demand, it is met with much hostility. So, the plaintiff feels the pain of having to be careful in making an opening demand, setting it neither too high so to invoke hostility, nor too low so as to leave money on the table.
What should plaintiff do? Determine what amount she would get at trial if everything went her way and the jury fell in love with her client, and use that number as a starting point. ( Id. at 122-125.)
The converse of the above clich̩ often comes from the defense which says, “I do not want to bid against myself”. This often happens when the plaintiff refuses to make an initial demand. Again, Mr. Little explains that it is best for the defendant to make the offer as a way of educating plaintiff in terms of the value that defendant places on the case (which in most cases is far less than plaintiff’s valuation). So, while the defendant may not want to bid against herself by offering the opening amount, she sets the level of expectation or implements the reality check for plaintiff. ( Id. at 125-128.)
Both of the above clich̩s involve the concept of “anchoring” which is defined as:
…a cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the “anchor”) when making decisions. During decision making, anchoring occurs when individuals use an initial piece of information to make subsequent judgments. Once an anchor is set, other judgments are made by adjusting away from that anchor, and there is a bias toward interpreting other information around the anchor. For example, the initial price offered for a used car sets the standard for the rest of the negotiations, so that prices lower than the initial price seem more reasonable even if they are still higher than what the car is really worth. (http://en.wikipedia.org/wiki/Anchoring)
Thus, while both plaintiff and defendant believe it is a bad idea to go first, in reality, it is a great idea as it sets the stage for the rest of the negotiation. She who goes first, in truth, controls the negotiation parameters.
Another clich̩ I often hear is “It’s Not the Money; It’s the Principle”. According to Mr. Little, what this really means is “that the other side has offered an amount of money to settle that does not do justice to the loss that plaintiff has suffered – and the plaintiff takes it personally.” (Id. at 154.) If it REALLY is about the principle, the parties would not be at mediation but rather at trial attempting to change public policy. In truth, the defendant has not offered enough, and plaintiff takes the low ball offer quite personally. ( Id.)
Another clich̩ involves the exchange of information during mediation. Often an attorney will tell me that she will not engage in “free discovery” by sharing information with the other side; they need to do their own homework. (Id. at 153.) As Mr. Little explains, this view is shortsighted as parties require information in order to make decisions about settling cases. Where there is no information, there will be no settlement. I have learned through my mediation practice, that parties will not change their positions on the value of a matter unless and until they acquire new or different information. So, if a party wants to settle a matter at mediation, information sharing is a must.
Finally, one of the statements I hear often is that the other party “… is not here in good faith.” (Id. at 147-153.) Again, what this really means is that the other party is not behaving the way the first party wants them to do; for example, by not offering enough money, or demanding too much money. To the speaker, the other side is “… not negotiating in a range that’s worth our time or effort.” (Id. at 148.)
Mr. Little suggests that one response is simply to make a counter proposal in an amount in that party’s acceptable range together with an explanation of why the other party’s proposal is not acceptable. Again, it is a question of educating (and/or anchoring) the other party to the speaker’s valuation.
Mr. Little discusses more than 20 other clich̩s in this chapter which resonant with me as I have heard them all at one time or another. But, as he explains, the bottom line is NOT really about the money, it is about the respect and acknowledgement that the payment of a sum certain in the “right” amount represents.
Just something to think about. . .
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