What are Impasse Solutions in Negotiation?

What are impasse solutions in negotiation?

What are impasse solutions in negotiation? We negotiate our way through life.  Every day, we enter into a series of agreements and exchanges to meet our needs.  “Negotiation” is simply a communication process between people who are trying to meet their needs and goals regarding something and need their negotiating counterparts’ cooperation to do so.  Both parties give something to get what they want.  When the value of the things exchanged is uncertain, the negotiation process may be an extended one. 

Every negotiation is what economists and negotiators call a “mixed-motive exchange,” defined as a situation in which there are conflicting incentives to cooperate and compete, though the strength of those incentives will vary with the circumstances.  By definition, every negotiator believes the exchange can be resolved in their favor.  Otherwise, they would not be negotiating.  

If they have prepared carefully, negotiators are bargaining based on well-thought-out interests and goals.  They may have decided on several rounds of positions and concessions, as well as their bottom line and the best and worst alternatives to a negotiated agreement.  Ideally, a well-prepared negotiator will know much about the other party’s situation as well.

But no matter how well-prepared the participants are, some negotiations will reach an impasse. “Impasse” is a situation in which the parties still wish to reach an agreement but are unable to make further progress. They get stuck.  What then?  Professional negotiators sometimes call helping parties get “unstuck” “breaking impasse.”

There are many techniques for breaking the impasse. Some federal government sources recommend going directly to alternative dispute resolution (ADR) techniques like mediation, or even arbitration upon impasse. (Arbitration does not break the impasse, except in the broadest sense.  It gives up on the negotiation process and delegates the decision to someone else.  Other techniques, like early neutral evaluation, can help keep the negotiation process moving by changing the parties’ perceptions of their dispute).

Mediation is by far the most common form of ADR parties use when an impasse occurs.  While some methods for breaking the impasse (like taking a break, discussed below) can be tried by the negotiators themselves, participants face the problem of reactive devaluation.

 Reactive devaluation is a cognitive bias that discounts an idea simply because it comes from an opponent.   There is debate about the exact psychological mechanism behind the reactive devaluation bias. But it seems clear that we expect our adversaries not to act unless they see some advantage to doing so.  Where the tenor of negotiations has been more cooperative, the bias would logically be less pronounced.  But there does not appear to research on this point.

The reactive devaluation bias means that even though parties may be able to utilize some impasse-breaking methods, third-party neutrals are likely to have greater success.  Several techniques for breaking the impasse are reviewed below.

1. Taking a break

By far the simplest method for breaking the impasse is pausing the proceedings. The pause may be as brief as a few minutes, a lunch break, overnight, or longer.

There are many reasons to take a break. First, it is a good idea if the parties are becoming emotional. Strong emotions affect our ability to negotiate and our attitude towards the process. For example, angry negotiators are overconfident, overeager to act, jealous, and distrustful.  They may underestimate the benefits of settlement or overestimate the likelihood of achieving the best alternative to a negotiated agreement.  Either one of these situations could lead to an impasse.

A few minutes’ calm discussion outside of the negotiation can help the parties control their emotions, remember the benefits of the agreement and return the focus to the planned bargaining strategy. Though anger is the most extensively studied, other emotions (guilt, sadness disgust, and even happiness) also negatively impact negotiation behavior and outcomes.

There are other reasons to take a break: 

  • A sustained mental effort like that negotiation requires can decrease attention spans and increase irritability and the likelihood of anger or depression, according to the National Institutes of Health.  If negotiations are falling apart, mental fatigue may be the reason.
  • Third-party negotiators may want to make recommendations or ask for instructions from their client or clients.
  • Unexpected offers, demands, or concessions may require contemplation.
  • Further information may be needed. 
  • New approaches may need to be tried.  A break is not a sign of failure. It is an opportunity to change a thus-far unsuccessful strategy.  

2. Bracketing 

Suppose two negotiators start very far apart, with plaintiffs demanding $2 million and defendants offering $50,000. After several hours, the parties are at $1.4 million and $125,000. Both sides signal that they have room to move, but Plaintiffs are angry that they have come down by $600,000 and defendants have only come up $75,000.  They refuse to come down further.  Defendants respond that the opening offer wasn’t realistic in the first place.  This situation could indicate a poor job of picking an opening number, or a truly divergent view of case value.  Either way, the bargaining session is at an impasse.

In this situation, a mediator might help the parties with bracketing, in which each side agrees to come to a certain number of the other party will make a similar move. For example, “I will come down to $800,000 if you will come up to $400,000.” This technique allows the parties to reset unrealistic expectations without losing face, gives a beneficial feeling of progress and hope, and communicates some information about parties’ expectations. 

The midpoint of a bracket is significant.  The parties often settle near the midpoint of the first two reasonable offers. Of course, not every bracket will be seen as reasonable, and the parties may exchange several rounds of bracket proposals before agreeing on one. But if one is agreed on, the chances of settling within this narrower range improve dramatically, and the parties move forward from their impasse to resolution. 

3. Reviewing past progress

Frequently, mediators will review past progress to create a sense of achievement and investment in the process of negotiation. They may also minimize the amount of work yet to be done.  For example: “We started this mediation two days ago three million dollars apart.  Are you really willing to throw away all that work over a gap of only $200,000? Let’s get this done!” Or, if the negotiation has resolved multiple issues, each of those issues might be reviewed, and the parties are urged to finish the job by overcoming the remaining barriers to resolution.

Of course, to some extent, this way of breaking the impasse uses the sunk cost fallacy. The work that has been done is time and money already spent. It cannot be recovered, and its investment should not logically affect the desirability of resolving the last few issues. But people are loss averse. They dislike feeling that their time and money have been wasted. Often, reminding them how much effort they have put into resolution will push them even beyond their “walk away” position to reach an agreement.

4. Decision trees

A decision tree is a visual representation of the probability of success or failure at various stages of the litigation process, and the effect of each outcome on the remaining litigation.  Some trees also include the cost of each step.

Because the litigation process is one with multiple decision points, variable costs, and difficult probability estimations, coming up with a precisely accurate decision tree is concerning litigation is next to impossible. Even if one could obtain accurate numbers, convincing the other side that it is accurate would be extremely difficult.   Also, given our various cognitive biases, we are likely to set our own probabilities of success too high and our opponents’ too low.  

Fortunately, exact probability predictions are unnecessary for the purpose of breaking the impasse. (One expert in using decision trees in mediation and negotiation suggests that using 10% increments of estimated probability is close enough). Even if it cannot predict outcomes with exactitude, a decision tree constructed in consultation with the parties can illustrate, educate and persuade.

For instance, the decision tree can help a mediator re-set overly optimistic thinking by demonstrating just how many things have to go right to achieve the desired outcome.

Let’s start by imagining a plaintiffs’ case in which the potential recovery is $10 million or nothing. Let’s also imagine three decision points, each with a 50% probability. First, there’s a summary judgment motion. Defendants have a 50% probability of prevailing, in which case recovery is $0. Next, there is a potential motion to exclude vital evidence, with the same probability and outcomes: Finally, there is only a 50% chance the jury will believe the plaintiff. In this simple example, the decision tree shows that the expected value of plaintiffs’ $10 million cases is $1.25 million (.50 chance of prevailing on Summary Judgment x .50 evidence will be admitted x .50 chance of favorable verdict = 12.5 percent chance of recovery x $10 million).

Let’s take a look at another case, this time from the defendants’ perspective. Suppose plaintiffs will recover $1 million or nothing in statutory damages, on any of three independent theories. Let’s further assume that the probability of prevailing on any theory is only 20%. Is the defendant correct in offering no more than $200,000 in a settlement? 

No, because the defense must prevail on all three theories to get a win. Plaintiffs only have to prevail on one of three theories to recover $1 million. They have three bites at the apple. The defense needs to reevaluate its position, and the decision tree is a good way to illustrate this. (The settlement in the actual case on which the illustration was $488,000, despite a “weak” case.)

5. Increasing credibility by disclosing information

Every negotiator is faced with the dilemma of how much information to reveal to his or her counterpart. The question is even more difficult when the interaction is competitive rather than cooperative. Too much information, or the wrong information, can be used to disadvantage the negotiator. For example, if he or she is in financial need, an opposing bargainer can offer just enough to resolve a pressing problem, although this may be below the fair market value of the item negotiated for. Such tactics will eventually give an overly competitive negotiator a bad reputation and may result in retaliation later.  But some negotiators focus only on the present, especially if they do not expect further interaction with the same party in the future.

The risk that discloses will be harmful leads many negotiators to keep sensitive information about the reasons for their actions private. This is understandable.  But no one likes to be confronted with a mystery.  And when a negotiation is at an impasse, it may be wiser to disclose information than to risk losing the deal altogether.  For example, let’s consider a situation in which a debtor is negotiating to pay less than all of the entire debt, or pay it on extremely favorable terms.  If a previously solvent debtor alleges that he or she is near bankruptcy, the creditor may find it difficult to believe and reject an offer of, say, twenty cents on the dollar for unsecured debt.  But if the debtor is willing to openly disclose financial information and show how bad things are, he or she will gain credibility and may be able to make a deal. It’s true that financial information is sensitive and using appropriate non-disclosure agreements would be prudent, but sharing sensitive facts with other parties to the negotiation may be the only way to break the impasse.

Consider the negotiation of a requirements contract in which a previously cooperative proposed supplier becomes intransigent on price.  Privately, she tells the mediator that her costs have gone up because she is experiencing supply chain problems with raw materials, but she does not want to reveal this. It might lead the buyers to worry that the supply they are bargaining for will be unreliable or that costs will rise.

While this reluctance to disclose a problem is understandable, an unexplained refusal to make concessions will almost always lead to the failure of a negotiation.  Breaking an impasse requires the revelation of the problem, at least in its broad outline. A potential customer may accept the explanation because similar supply chain problems are happening across the industry. Alternatively, they may be able to suggest a different source for raw materials. Of course, the negotiation might fail, but disclosure could be necessary to break the impasse.

Sometimes, withholding information isn’t about financial embarrassment or privacy. It’s about keeping a perceived advantage for a possible trial. The following incident actually happened to the author while he was mediating a personal injury case apparently worth $30,000-$50,000.  For nearly an hour, the defense refused to move from a $1000 offer.  After repeated discussions in caucus, the attorney finally revealed that the insurance company thought the claim was a fraud because it had the plaintiff on film lifting a prohibited amount of weight. The attorney refused to disclose the film because he wanted to “drop it on her like a bomb at trial.” The author patiently explained that disclosure could settle the case cheaply— in which case, there would be no need for the expense of trial. Alternately, the plaintiff might have a reasonable explanation (such as that she had no choice but to lift the item despite the pain it caused) in which case negotiations could begin in earnest. Unfortunately, the defense attorney was determined to have his moment of glory at trial, and there was no disclosure. The mediation ended shortly after the unsuccessful caucus.  The author remains convinced that appropriate disclosure might have led to a successful mediation. Instead, too much secrecy led to impasse and failure.

6. Testing what failure to settle looks like

Another possible method of breaking the impasse Is to suggest to the parties that they consider in detail what the failure of negotiations will look like. Assume the mediation ends. Then what? Can the participants live with the potential consequences of no agreement?  Some mediators threaten to end the mediation, to make the consequences more real, but this could damage the trust between the parties and the mediator.  Caucusing with each party on this topic is more appropriate.

Most negotiators consider the best alternative to a negotiated agreement, but few consider the worst.  What could go wrong, and how badly? This is a good opportunity to use decision trees. What could happen after the unsuccessful mediation? Summary judgment? Mistrial? Adverse verdict? Judgment including costs and fees? Research confirms that investors are less likely to become involved with businesses than litigate. What effect might this have on the parties? What about foreseeable damage to one’s credit?

What effect could one’s own costs have? What are the chances a favorable verdict will be appealed or uncollectible? What about damage to an important business or personal relationship? Can that be tolerated?

Of course, there are potential good outcomes after a failure to settle, and they should be acknowledged to give a balanced view of the situation. But good outcomes have probably already been considered. The question is usually whether the potential negative impacts of a failure to settle have been adequately reviewed, or whether events since the dispute arose, make a positive outcome less probable.  If the potential results of failing to agree are worse than the parties realized, they may return to the bargaining table to overcome the impasse.

 Sometimes the key is not the client, but for counsel. Of course, they have a duty to put their clients’ interests ahead of their own, but that doesn’t mean their interests are irrelevant.  Attorneys have substantial influence about whether it is worthwhile to continue negotiations. A mediator might highlight the inconvenience of going to trial by asking about other work that will be interfered with, holidays, or special events that might be missed because of the trial or necessary trial preparation. Similar questions can be directed to clients as well. Of course, the client makes the final decision on settlement.  The point is that clients and their counsel are people with lives impacted by litigation and arbitration, and those impacts are part of the cost of not settling.   A good overarching question is “What would you be doing with the resources you will devote to this dispute if it had settled today? With those last opportunities in mind, what are you willing to do to try to break the current impasse?” Focusing on the personal opportunity cost of continuing the dispute may be just the incentive the parties need to take the next step.

7. Perspective-taking

Professor Adam Galinsky defines “perspective-taking as “an ability to consider the world from other viewpoints and anticipate the actions of others’’  it can help negotiators understand interests and motivations, anticipate demands and responses, and creatively overcome differences.

Galinsky found that subjects with perspective-taking ability maximized joint benefit from a negotiation exercise. They were more likely than those focused on their own viewpoints to find a hidden creative solution.  

In an impasse situation, parties can be asked, either in caucus or across the table, to try seeing the conflict from the other party’s perspective and suggesting solutions the other party might accept and concessions they might be willing to make.  The mediator can then ask which of those solutions and concessions he or she would be willing to accept to resolve this impasse. If the answer is “none,” follow up questions exploring that, and how close he or she is willing to come.

Of course, the accuracy of the perspective-taking will have to be tested by presenting these ideas to the other party. The mediator can help each party more accurately understand the other’s positions and needs. Perspective-taking has a number of advantages. It clarifies any misconceptions about the other party’s positions, needs, and interests. It also forces each party to think explicitly about the other’s needs and to search for mutually acceptable solutions to the impasse.

8. Role-playing

Conflict sparks creativity, and diversity of opinion is valuable.  Criticism of suggested solutions can spark creative improvement.  During the Cuban missile crisis, President Kennedy brought in experts to challenge his own conclusion that direct military intervention in Cuba was necessary.  They recommended a blockade, saving many lives. And the Catholic Church is so convinced that conflict exposes weaknesses that an official called the “devil’s advocate” tests every case for canonization.

Conflict-oriented role-taking fosters creativity and improves perspective-taking skills.  It can be done politely but effectively in mediation: “If you disagree with something said at the table, say so and we’ll explore the issue,” or “Let me just play devil’s advocate.  Isn’t there a better way? What about…”

However, it may be difficult to role-play across the table effectively in an impasse situation. Positions may have stiffened, and anger flared.  Negative emotions will impair any effort at critical role-playing and must be dealt with first.

Role-playing exercises probably work best where the negotiation has been cooperative, problem-solving, or both. At the very least, a substantial reservoir of trust must have been built up by the mediator. And it must be emphasized to both sides that role-playing is only an exercise designed to give rise to new approaches and unexpected solutions.  The moment the mediator is seen as taking sides, the exercise must stop.  The mediator cannot be effective if he or she is not seen as neutral. Critical role playing therefore must be done very carefully.

9. Minimizing risk

There is risk in every negotiation, but the risk is often perceived as higher when dealing with a new venture or a previously untried negotiating partner. Because most people are both risk-averse (preferring low uncertainty to high uncertainty, even if the average outcome is the same) and loss-averse (preferring to avoid losses to acquiring equivalent gains).  Psychologically, losses have about twice the impact of equipment gains.  Of course, not everyone is equally risk-averse, or there would be no venture capitalists or entrepreneurs.  But these characteristics are very widespread and can be a real factor in negotiation.

Let’s return for a moment to the hypothetical of a parts supplier trying to secure a requirement but uncertain of the supply chain for raw materials. There is uncertainty on both sides. The buyer is uncertain the seller will be able to keep up with demand, and the seller is uncertain what her costs will be and whether the eventual demand will allow her to turn a profit.

Let’s assume that these concerns have been shared and that they are causing the impasse. What can the mediator do?

There are a number of ways to limit uncertainty and the possibility of loss. One frequent method is to start the agreement with a trial period.  Both parties limit their long-term uncertainty by seeing how things work out practically. And both parties limit the risk of loss by limiting the length of the contract. It may not be ideal, especially if there are significant startup costs.  But as compared to no deal at all, a chance at a long-term deal preceded by a probationary period seems preferable.  The lowered risks often help parties break the impasse.

There are other ways to limit uncertainty and make the loss less likely. Is the party concerned about quality? The mediator could discuss a warranty. Are there supply chain problems? Warehousing, multiple suppliers, and contingent business interruption insurance can help address resulting losses.  Concerns about the recovery of start-up costs could be addressed by modifying the requirements contract to add a minimum annual purchase. And so on. The point is that risk aversion and loss aversion may drive the parties away from otherwise acceptable deals. These causes of impasse can be dealt with effectively. If those concerns are brought to an experienced mediator, he or she can suggest ways to lessen their impact.

Ranking and trading

Those who negotiate competitively often think of the world in purely distributive terms, assuming gains must equal losses: One more for me equals one less for you. Economists call this kind of situation a zero-sum game. Cooperative negotiators using integrative methods insist that the world is not a zero-sum game and that everyone can gain in a negotiation.

 While it is difficult for everyone to get everything they want, it is often possible for everyone to get some of the things they want, perhaps enough to make a deal worthwhile. This is true even in a competitive situation because while we all want many of the same things, we don’t necessarily want them to the same degree.  

We all may want a nice home, money, family time, and leisure, for example. But if I am just starting my career, I may be willing to sacrifice leisure and family time to focus on my career and making money. My coworkers may feel exactly the opposite, doing what is required and going home to their families. We constantly rank the things we want and make trade-offs in life. Doing so explicitly can help break the impasse.

During the caucus, the mediator can ask a party what issues remain unresolved. If there are multiple issues remaining, the impasse may seem difficult to resolve. But a rank and trade approach can help.

Have each party list the remaining issues in order of importance. (If the issues on the lists don’t match, clarification is needed; someone thinks a live issue is resolved, or vice versa). To the extent the parties’ issue rankings don’t match, there is an opportunity to trade.  Questions like “What would you give up to make sure you got your way on your first issue?” or “What issue or issues would you insist on having your way to give up your top-ranked issue?” can help indicate the relative strength of the parties’ positions. Even if rankings match, the relative importance of the issues still may differ, or separate interests may underlie the rankings.  If those interests can be addressed in other ways, the rankings will almost certainly change, and the issue may be resolved altogether.

Ideally, the mediator and the parties will be able to work out a package deal to address all of the remaining issues constituting the impasse. Even if this is not true, some of the less difficult issues may be taken off the table, so that the remaining issues can be addressed in other ways.

The perfect result

At least one source recommends asking parties about “the perfect outcome” of a negotiation to get ideas on how to move forward beyond the impasse.  While it’s possible that these visions will be entirely complementary and the parties can all have what they want, it’s far more likely that the parties’ respective “perfect outcome” scenarios will conflict in places.  Asking about a “perfect” outcome may not be the best way to break the impasse.  It leads a party to picture having everything their own way. It would be better to ask about a “good outcome,” and leave some mental room for the needs of the other party or parties.

Either way, the next step is to look for areas that the parties can agree on or are willing to concede in order to move forward. To some degree, this technique is like the rank and trade method discussed above.  Like that exercise, it may not lead to complete resolution, but it can engender progress and give hope while narrowing the issues that remain.

Conclusion 

There is no one sure way to break the impasse in negotiations. But in general, success will require a thorough understanding of the dispute, the parties’ interests, and the prior negotiations.  Whatever method is used will take trust and patience, because the mediator’s task is to change the parties’ perspective and get them to take further action when none was expected.  Breaking impasse will get the parties moving forward again so that resolution is possible, and often energize everyone so agreement comes swiftly.

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