Negotiation Strategies April 18, 2012

Bargaining Power: Making the Most of the Power You Have

Power is the most important factor in determining outcome. Experienced people are aware of this and experiments confirm it. Power is the ability of one person to control the resources and benefits of another. To the extent that one person can control something another needs, that person has power over the other. How can you build your base of power and limit the leverage of the other side?

Power is rarely what it appears to be. People have more power than they think because they are more aware of their own limitations than those of the other side. They recognize the losses they would suffer if agreement can not be reached. What they cannot do is look into the mind of the other party and accurately assess how worried they are about losing the deal if deadlock occurs.

Additionally, both parties always have some constraints upon their action, even when they are in a strong position. These limits may be legal or moral, economic or physical, geographic or organizational, imagined or real. These constraints limit the negotiator’s capacity to use all the power they have.

For example, assume you have not made a mortgage payment for six months. The bank has threatened to foreclose and take possession of the house. They have every right to do so. Your negotiating position is not good. What limits the bank in taking over your home?

The bank may have too many foreclosed homes in your area. It may cost them too much to maintain the property in saleable condition. Vandals may damage the empty property. The bank auditors may determine that the bank has too many bad loans and raise the bank’s reserve requirements. And so on.

Despite its superior financial and legal power, the bank is limited in its willingness or ability to use all the strength it has. Similar constraints exist in most negotiations.