In 2017, an ABA Business Law Section task force completed a landmark report titled “Defining Key Competencies for Business Lawyers” that was published in The Business Lawyer. The report, directed towards law firms and law schools, drew on the framework of the influential ABA MacCrate Report (“Legal Education and Professional Development—An Educational Continuum”).
Both reports identify negotiation as a key lawyering skill. As the MacCrate report notes, negotiation is a skill that is “essential throughout a wide range of kinds of legal practice….” The reports discuss specific analytical skills that lawyers should employ when participating in negotiations. The MacCrate report specifically advocates four specific skills that lawyers should utilize in negotiations: (1) determine the bottom line; (2) evaluate alternatives; (3) analyze whether the negotiation is zero-sum, non-zero-sum, or a mixture of the two; and (4) identify outcomes from the negotiation.
This article elaborates on these four analytical skills and includes a link to a free exercise that you can use to develop these skills among members of your negotiating teams.
The Analytical Skills that Lawyers Should Possess
1. Determine the Bottom Line
The MacCrate report correctly emphasizes the importance of determining the bottom line, which in negotiation terminology is also called the reservation price. But other information is also important when analyzing a negotiation.
- Your stretch goal. Negotiators who have the largest stretch goals are most successful over time. Your challenge is to select a stretch goal that is well beyond your reservation price, but that is not so unreasonable that you lose credibility when presenting it to the other side.
- This is your ultimate goal in a negotiation. Targets lie somewhere between your stretch goal and your reservation price.
- Zone of potential agreement. Great negotiators look at negotiations from the perspective of the other side. This enables them to estimate the zone of potential agreement, which is the range between their reservation price and the reservation price of the other side. If successful, the deal will take place within this zone.
2. Evaluate Alternatives
Your most important task when preparing for a negotiation is to evaluate your best alternative if the negotiation is not successful. In negotiating language, this is your BATNA (“Best Alternative to a Negotiated Agreement”). Determining your BATNA is important because it is a key source of power. The better your alternative, the more leverage you have to walk away from a negotiation.
Your BATNA strategy should include three elements: find, weaken, and improve. First, you should try to find the other side’s BATNA so that you can determine how powerful they are. Second, you should attempt to weaken their BATNA. For example, if you are involved in negotiating the sale of your client’s company to a buyer who is considering an alternative purchase, you should emphasize problems with the alternative. Third, you should try to improve your BATNA. In negotiating the company sale, for instance, try to find other potential buyers so that you can develop a strong alternative for your client.
3. Analyze Whether the Negotiation is Zero Sum
Determining whether a negotiation is zero sum is important because your negotiation tactics might be more competitive when fighting over a fixed pie. But don’t be trapped by what researchers call the “Mythical Fixed Pie Assumption.” The assumption that every negotiation is zero sum, while prevalent in settlement negotiations, also arises during transactional negotiations. To avoid the assumption, you should ask questions designed to identify the interests of the other side and match those interests with those of your client to develop opportunities that benefit both sides.
4. Identify Outcomes from the Negotiation
The decision tree is an especially useful tool when identifying outcomes from a negotiation. For example, when you are involved in settlement negotiations, you can use a decision tree to calculate the expected value of the litigation, which is often your BATNA if the negotiation is not successful. Decision trees are also useful during transactional negotiations, such as helping your client decide which of two companies to purchase. Creating a decision tree involves a three-step process: (1) depict the decision in a tree form, (2) add probabilities and financial values, and (3) calculate the expected value of the litigation or a business transaction. I discuss decision trees and the other analytical skills in greater detail in Negotiating for Success, Chapter 3, “Conduct a Negotiation Analysis” (Van Rye Publishing, 2014).
A Negotiation Exercise to Teach the Analytical Skills
To help you and the colleagues on your negotiating teams develop a common understanding of these skills, I have prepared a teaching package that you can use without charge (and no permission is necessary). The package includes a negotiation exercise with two roles, a Teaching Note, and PowerPoint slides. There is a twist to the exercise, known to only one of the parties, that will raise ethical concerns and challenge their negotiating skills.
I have used this exercise in training lawyers and judges. Organizations in the public and private sectors (for example, the World Bank and one of the five largest U.S. companies) have used the exercise for negotiation training led by their in-house staff. Thank you to the University of Michigan for support in the development of this package and encouragement to make it available for free distribution outside the university. My only request is that if you decide to use the exercise, I would appreciate your comments and recommendations for improvement.