Be the smartest kid on negotiation block by framing and anchoring

Published on by Victoria Pynchon.

In the political arena, the power of framing is generally called "spin."  You needn't, however, be an expert at renaming torture "coercive interrogation techniques" to become skilled at framing your demands during negotiations. 

The Power of Framing

Frames are cognitive shortcuts that help us organize complex phenomena into coherent, understandable categories. When we label a phenomenon, we give meaning to some aspects of what is observed, while discounting other aspects because they appear irrelevant or counter-intuitive.

Thus, frames provide meaning through selective simplification, by filtering people's perceptions and providing them with a field of vision for a problem. To demonstrate the power of framing, researchers asked subjects questions that contained suggestions of size, number and duration.  The impact of the framing terms -- short and tall, for instance -- were striking.

When asked how long a movie was, research subjects' average estimate was 199 minutes, 69 minutes longer than when they were asked how short the movie was (130 minutes). When asked how tall the basketball player was, research subjects' average estimate was 79 inches, ten inches taller than when asked how short he was (69 inches). Research subjects were also profoundly affected by numerical ranges.  When asked whether they'd tried "5 or 10" headache products, subjects' answers averaged 5.2.  When given the option of "2 or 3" headache products, they averaged 3.3.

A common negotiation frame treats the difference between offers and counter-offers at the point of impasse as the total amount in controversy.  If, for example, Dawn opened negotiations at $1.5  million and has, in the course of negotiation moved to $600,000, while Harry  commenced negotiations at $250,000 and has moved to $550,000 at the point of impasse, the negotiators will tend to  focus upon the reasonable division of the $50,000 delta rather than upon the total $550,000 offer or the total $600,000 demand.   

Focusing solely upon the value that separates the parties reframes the subject matter of the negotiation as the avoidance of the dispute's continued cost rather than the "fair," or "just" or "reasonable" value of the loss at issue, often unfairly so.   

And don't think that attorneys, judges and sophisticated commercial clients are immune to the effects of anchoring and framing.  

The Power of Anchoring

We've discussed before Adam Galinsky's excellent short article When to Make the First Offer in Negotiations. As Galinksy notes:

Research into human judgment has found that how we perceive a particular offer's value is highly influenced by any relevant number that enters the negotiation environment. Because they pull judgments toward themselves, these numerical values are known as anchors. In situations of great ambiguity and uncertainty, first offers have a strong anchoring effect—they exert a strong pull throughout the rest of the negotiation. Even when people know that a particular anchor should not influence their judgments, they are often incapable of resisting its influence. As a result, they insufficiently adjust their valuations away from the anchor.

That the anchoring effect is not limited to the unsophisticated or uneducated is demonstrated  in their article Inside the Judicial Mind.  The authors explained that they tested the effect of anchoring on federal magistrates 

by providing the[m] with a description of a serious personal injury suit in which liability was clear but the amount of damages was in dispute. [They] asked half of the judges to indicate what they thought an appropriate damage award would be in light of the plaintiff’s extensive injuries [and] the other half . . . the same question, but [not until they'd] rule[d] on a motion to dismiss the case on the ground that the plaintiff had failed to meet the $75,000 jurisdictional minimum for a diversity case.

The motion had no merit, but it had an effect. [The authors] found that the motion did have a large effect on the judges’ damage awards.Those judges who did not rule on the motion awarded, on average, $1,249,000, while those judges who did rule on the motion awarded, on average, only $882,000. The frivolous motion to dismiss, which forced the judges to consider whether the case was worth more than $75,000, lowered damage awards by 29 percent. These results suggest that judges are affected by anchors, even those that may be unrelated to the likely value of the case.

You see how subject to influence we are. We're suckers for it. 

Question everything. Then frame everything else in a way that favors you.

Published on by Victoria Pynchon.