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Brain Circuits
Negotiation: How to calculate your first offer
Making a wrong move in a negotiation can ruin the best-laid plans. Here’s why the type of offer you should put on the table depends on the scenario.
Scenario A: Both parties are committed to talks
As discussed earlier in this series, it pays to make the first offer in a negotiation. And when both parties are committed to talks, that first offer should be as precise as you care to make it.
Example
When offering a salary to a job candidate, it’s better to offer them €126,000 or €155,000, rather than a round figure such as €120,000 or €150,000.
Reason
- The more precise your offer, the more likely it is to act as an anchor for the other side. This is because they are likely to attribute more confidence to your offer – it sounds like you know what you’re proposing.
Benefit
- You will likely have to negotiate less with your counterpart once talks begin – you have laid down your distinct marker (or dropped anchor) and the other side must now navigate in relation to it.
Scenario B: The other side has yet to come to the table
The opposite applies when the other person has yet to decide whether to enter into a negotiation with you. In this instance, it’s better to make a less precise first offer.
Example
You want to recruit candidates for a particular role.
Reason
- First-offer precision can create a barrier to entry, scaring people away from entering into negotiations in the first place because they are likely to see you as less flexible.
Benefit
- By not being too precise, your offer is likely to attract more interest. Potential negotiators also learn less about you and what you’re ultimately prepared to offer, which can be helpful in many situations.
Key learning
In a scenario where both sides have committed to negotiations, make the first offer and make it a precise one. But, if the other side is not yet committed to talks, make the all-important first offer less precise.
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