In the world of business, negotiation is as ubiquitous as it is crucial. Whether in sales, procurement, or project management, or even at home, the ability to negotiate effectively can make the difference between a successful deal and a missed opportunity. A common negotiation tactic is “splitting the difference”, where parties meet halfway in an attempt to fairly resolve their dispute. However, this approach, though popular, doesn’t always lead to the fairest or most effective outcomes. Today, I want to explore a more nuanced negotiation tactic that goes beyond simple compromise, aiming for not just agreement but optimal satisfaction for all involved.
The Misconception of Fairness
It’s a widely held belief that if both parties compromise equally, the outcome is inherently fair. This sounds reasonable at first glance, but the reality is often more complicated. Take, for example, the staffing industry, where a client may demand a 42% markup, believing it to be fair based on their perspective. However, this demand might not be reasonable or justifiable in the broader context of the negotiation. However, the real question is, “compared to what?” Is that what the market commands? What you thought you should pay? What you’re currently paying but unhappy? Such scenarios reveal that initial positions may not hold equal weight or reasonableness, challenging the notion that an equal compromise is always fair.
A Real-World Scenario: The Real Estate Example
Consider a homeowner who lists their house for $500,000, with a buyer offering $480,000. Splitting the difference would suggest a sale price of $490,000, appearing fair at a glance. However, if the house’s real value is closer to the buyer’s offer, then the seller benefits disproportionately from the compromise. This example illustrates that the perceived fairness of splitting the difference can mask an underlying unfair advantage. So never assume this tactic will work in your favor.
The Tactic in Action
Imagine a contractor negotiating a remodeling job, with an initial bid of $86,000 and a client offer of $75,000. After negotiations, the customer offer was raised to $80,000, with the bid lowered by the Contractor to $84,000. Rather than proposing to split the difference, the contractor expresses regret over the potential deal falling through over a relatively small amount. This often leads the client to suggest splitting the difference themselves, effectively setting the negotiation at $82,000. This maneuver resets the negotiation range in the contractor’s favor without them making an additional concession.
The Impact of the Technique
This tactic has a profound psychological impact. By letting the other party suggest splitting the difference, they perceive it as a concession, feeling they have “won” part of the negotiation. This not only shifts the negotiation range favorably but also enhances the other party’s satisfaction with the outcome, believing they’ve successfully steered the negotiation.
Negotiation isn’t merely about reaching a middle ground; it involves a deep understanding of the value and fairness of initial positions. Encouraging the other party to propose splitting the difference can be more advantageous than offering it yourself, as it strategically shifts the negotiation range and improves the perception of a successful negotiation outcome. This approach invites us to think more critically about our negotiation strategies, focusing not just on compromise but on achieving a genuinely satisfactory outcome for all parties involved.
I invite you to share your experiences and thoughts on this tactic. Have you applied a similar strategy in your negotiations? How did it impact the outcome?
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