Sheldon Stark IAM Scholar in Residence
Part 3: Mediator as Coach
This is Part III of a 3-part article on Managing Opening Offers. Part I dealt with establishing trust and gaining confidence in the mediator and the mediator’s coaching from the very start, overseeing the exchange of necessary information, and encouraging the parties to craft compelling written submissions that layout their client’s perspective in a persuasive narrative well supported by the evidence. Part II dealt with determining whose turn it is to put out the first number on the day of mediation and the option of delaying the exchange of numbers until a realistic risk assessment has softened the parties’ expectations. In this final Part, we will discuss the mediator’s role as negotiation coach and how to best manage or massage initial proposals and counter-proposals.
Communicating Unrealistic Numbers – or Not!
Often, opening offers reflect battles fought long before we arrived at mediation. Sometimes the opening proposal at mediation is a significant departure from a number previously communicated. For example, someone offered a modest number “way back when” intended for a “quick and dirty” resolution at the beginning of the litigation process. Even though rejected at the time, “quick and dirty numbers” retain an emotional power. Offerees in this situation consider the new numbers “negotiating backward,” and express deep resentment.
Even when much time has passed, significant sums have been expended on attorney fees in the interim or lost profits or lost wages have accumulated, the offeree can’t stop thinking about that earlier offer. Of course, “nothing is more expensive than a missed opportunity.” H. Jackson Brown, Jr. “That was then,” I like to say. “It didn’t happen. This is now. Mediation is a forward-looking process. Let’s try to move forward from here.”
Because aggressive opening numbers can threaten to derail the entire process, I am a strong believer in pushing back when the mediator anticipates a hostile reception and risk of an equally aggravating response. How do we know when a number is too aggressive? I try hard to remain neutral as long as possible, not forming an opinion about the merits or the value of the case until I know significantly more than I’m likely to know when the first numbers are communicated. I may never know “the right number”, which is ultimately for the parties to determine. Nonetheless, it’s generally as clear as day when a number is totally out of whack.
First, of course, the offeree will tell you what’s wrong with the number. Remember they may or may not be spinning us. Listen to their reasoning. Does it make sense? After years of service as a litigator and mediator, I generally can tell whether we’re dealing with a five, six, or seven-figure claim. If a demand is multiples of projected economic damages, alarm bells should be going off. If a demand exceeds policy limits, it doesn’t take a ton of experience to question how it will be received. If the goal is to keep the negotiation going, something must be done.
Accordingly, I ask permission to push back.  Will they consider whether there’s a better way to open? No one has ever refused to engage in reconsideration – whether they ultimately change their number or not.
- “Why would you choose to start with an over-the-top, hyper-aggressive offer?” The answer usually begins with “They need to understand that this is a serious case and we’re not fooling around!” To demonstrate that in fact, such numbers frequently send the opposite message, I ask: “What do you think will be their reaction? Whatever message you intend, what message will they receive?” “Is there a risk they’re going to walk out?”
- Or, I ask them to anticipate the number they’ll hear back. Experienced plaintiff’s lawyers generally acknowledge it will be in the “insult” range. “If that’s the case,” I ask, “why start there?” If the demand exceeds policy limits, I ask their experience with previous insurance carriers. “Have you ever settled a case in excess of policy limits? Let me ask it another way: when was the last time you settled a case for policy limits without a trial?” And, of course, I remind them that the bigger the disparity, the easier it is for the other side to just say no.
- “Is the number an ‘outlier?’ Won’t they recognize it as such? Isn’t this number many multiples of your actual losses? What’s their incentive to continue the mediation process?”
- If the offeror doesn’t recognize their numbers risk ending the negotiation, I share the reaction I anticipate based on past experience. Overly aggressive numbers cause consternation and aggravation. They incite an adverse reaction. The other side may well conclude that they’re wasting their time and the process can come to a screeching halt with the parties even more escalated than they were before. “Isn’t it a bit early to start down that path? Do you want to run that risk? Or would you like to try something else?”
My coaching generally addresses first numbers, not last. I don’t tell parties what they should settle for. It’s their case, their life, their money. I tell parties I don’t know what their bottom line is, and don’t want to know. Surely, they’ve included enough room in their opening number that there is ample room to move in the early rounds of negotiation. I urge taking a small risk to see if their “generosity” is reciprocated. If it isn’t, there’s ample time to slow down .
If the party insists I communicate an over-the-top offer I will do so. Before the other side explodes, however, I remind them they have three options.
First, they can pack up and bring the negotiation to a halt. I encourage rejection of this option. I remind them that we’ve invested a great deal in the process already: “I do understand your consternation. But mediation is more about the future and where we go from here than a review of the past; let’s see if there’s a better approach than calling things to a halt.” I might also remind them of Thomas Jefferson’s 1816 letter to John Adams: “I like the dreams of the future better than the history of the past.”
Second, they can stay and proffer an equally unproductive counteroffer, mirroring the offer. I also encourage rejection of this option.
Or, third, they can remain and propose a number that gets the process back on track. “Can you be the mature, sensible party this morning? We can certainly wrap the number in an explanatory message. I’ll even help you craft it.” The following phrases can be helpful: To us, your last number was unproductive. We thought about leaving, but we want to show our good faith and willingness to reach resolution. We came here to settle, but we obviously have serious disagreements about value. We’ve authorized the mediator to communicate the right number for this round. And, we have room to move. This is not a take it or leave it. Please don’t read this as a sign of weakness, but a sign of our resolve to keep the process going in a case that really should be settled.
Unfortunately, even when the party selects the third option, the atmosphere may be poisoned and the foundation for a sound, productive negotiation jeopardized and hence, I strongly push back. Ironically, if the counteroffer is the equal opposite (the second option), it is almost inevitably met with disbelief, consternation and complaint from the very negotiators who started it. It sometimes helps to ask the offeror, now visibly upset, to look down from a process perspective and recognize that the other side has its own valuation. “This probably isn’t the number they planned to start with. They are simply responding to an unrealistic demand with an equally unrealistic counteroffer simply to close the round. Don’t jump to the wrong conclusion about where they really are.”
Sometimes, over-the-top offers and matching counteroffers can result in multiple rounds where the parties move in inches, continuously antagonizing and frustrating each other. This is human nature to act reciprocally., and frequently our mediator optimism starts to lose its attraction for the participants. I ask whether the lawyers would like to avoid such a “death spiral”, suggesting that it might be worth taking a risk and starting with a more realistic demand. Robert B. Chialdini, in his book Influence, The Psychology of Persuasion, “Chapter 2, Reciprocation: The Old Give and Take … and Take” explains that reciprocity works both ways. I might say “If you make them a productive offer, I’ll do what I can to persuade them to return the favor. We call that making reciprocal concessions. If they don’t reciprocate with a number that affords you optimism, it’s still early. You won’t have given away much, you retain ample room to slow back down in the next round. This approach encourages both parties to “fast forward” the process, reward good behavior, and reinforce productive proposals.
Developing a Rationale for Each Offer
Offers that come with a solid rationale are the most productive. A rationale avoids the dead end of “my (arbitrary) gut feeling is better than your (arbitrary) gut feeling.” In an employment discrimination case, for example, plaintiff should put together a breakdown of economic losses, past and future including the assumptions on which it is based, e.g. when plaintiff might find comparable employment, how long future damages might be awarded, what are estimated attorney’s fees and costs. The defense is then able to respond with their own assumptions. A much more productive negotiation results when each side can see the other’s assumptions.
The same principles apply in a commercial case. If experts have been retained, I encourage the lawyers to exchange their damage reports. If they haven’t hired experts, I ask them to bring lost profit documentation and how they expect to project damages at trial. Again, an exchange over specific numbers and assumptions is more productive and less frustrating than stubborn generalized “gut feeling” proposals and counterproposals without a rational basis.
If the mediator can get the first exchange of numbers off to a good start, chances are subsequent rounds will also be productive and less frustrating. A properly managed opening round lays the foundation for a resolution both sides can accept.
The mediator’s role is to assist the parties in negotiating a resolution to their conflict. Negotiation coaching is an essential component of that. As the only person who spends time in both rooms, the mediator is uniquely situated to give insightful coaching advice in the negotiation process.
Mediators choose the best time to introduce the exchange of numbers. Mediators anticipate how offers will be received and what the reaction might be. Experienced counsel ask for the mediator’s take on such questions. Parties willingly consider mediator coaching because we have gained their confidence in us and our judgment.
We mediators have provided them with a good process, read their papers, listened to their stories, asked good questions, understood their perspective, and explored the costs of continuing the conflict. We helped them to identify and weigh their risks neutrally and objectively. We explained why we think they should modify their proposals or buttress them with additional rationale.
Coaching makes a difference. Managing opening offers matters. Coaching may not guarantee success, but it does reduce contention, encourage rational exchange, and dramatically improve the prospects for a WIN/WIN resolution.
 I often hear criticism of mediators who simply carry numbers back and forth. Litigators tell me they want a mediator who pushes back and offers suggestions for more productive proposals. “That’s what we hired you for!”
 Dick Soble taught me not to ask. The answer is rarely honest and generally paints the party into a corner that is difficult to get out of. As noted, the top or bottom line in the morning is far less important than the one modified by rigorous risk assessment.
To read Part I: “Setting the Table” click here.
To read Part II:’ Choosing the Right Moment to Open the Negotiation Process’ click here.