2 PerspectivesMarch 22, 2010

Another Look at How the Brackets Work

It’s no secret that I went to Duke Law School and I’m happy to see the Blue Devils advancing through the NCAA Tournament brackets this year, but this isn’t a post about basketball.  I wander off topic every now and then, but there are limits.

This post is about bracketing — one of the more important, and overlooked, aspects of negotiation.  First, a summary:

In negotiation no number is irrelevant, and no proposal is ever forgotten.  Every offer you make, every figure you float, and every potential path to settlement you communicate to the other side will forever impact your negotiations.

Negotiators ignore this rule at their peril.

What Are Negotiation Brackets?

The message from my client’s deal lawyer was as informative as it was economical:  “We’re bracketed at 250 and 400.”  With this shorthand he summarized the negotiation in just a few words: the settlement range was between our offer, $250,000, and the plaintiff’s last demand, $400,000.  This is the essence of settlement brackets — they embody the stated settlement positions of the parties, and define the outer limits of where the case will settle.

Why Are Brackets Relevant?

Adam Galinsky’s article When to Make the First Offer in Negotiations, published in Harvard’s Negotiation in 2004, tells us:

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.

(Thanks to experienced attorney and mediator Victoria Pynchon and her post The Power of Framing and Anchors for leading me to Galinsky’s article.)  Stated plainly, the number you communicate to the other side anchors your position — and brackets the negotiation on your side — because it’s the best information your opponent has about what you’ll settle for.  It’s hard to imagine information more relevant than that.

You Can’t Unring the Bell

I was once given great communication advice:  “You can’t unring the bell.”  You can’t take back what you said about last night’s meatloaf, and you can’t get the other side to forget a proposal you made last week.  It doesn’t matter if your offer expired, and it doesn’t matter if you feel you’ve had a slight edge in discovery since you made your proposal — technically you aren’t bound by it, but your number won’t be forgotten.

It wasn’t so long ago that a good friend of mine who serves as a Fortune 500 general counsel bragged about settling a case outside his original brackets after a mediation with one of the country’s top mediators.  The reason he bragged about it is because settlements outside the brackets are unusual; without a drastic change in circumstances they almost never happen.

Beware the “Whisper Number”

If what you say can’t be unsaid, can you say it with caveats?  Can you propose, as one well-known Los Angeles plaintiff’s lawyer said to me:

Let me tell you what — my client hasn’t approved this, but I think I can get him to $3 million if you can get there.  What do you say?”

The short answer is that you’re stuck with that number.  You may want to run away from it, disavow it, or ignore it, but never forget that Galinsky tells us that we’re “highly influenced by any relevant number that enters the negotiation environment.”  We are bracketed at your self-named “whisper number.”

The Brackets Are Not the Same as a Bracketed Proposal

You now know what “the brackets” are — the stated negotiation positions of the parties.  Although the words are almost the same, “the brackets” are not the same as a “bracketed proposal.”  Los Angeles mediator Ralph Williams gives us an example of a bracketed proposal:

I will offer you $100,000 if you will reduce your demand to $300,000.

In this case, if the parties have offered and demanded $50,000 and $600,000, the case is bracketed at $50,000 and $600,000, but Williams’s “bracketed proposal” abandons the brackets, resulting in hypothetical offers with a similar name.  But they actually aren’t the same, and I’ll write more on that later.

Let’s Go Duke!

Know what bracketing is before you start.  You’ll be glad you did.

And Let’s Go Duke!

Categories: Communication,Fundamentals,Negotiation,Settlement,Tactics

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