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Credibility of threats in negotiations – don’t forget to make the threat!

In my endless moving watching spree, today I watched an exemplary movie from the sixties: Dr. Strangelove: How I Learned to Stop Worrying and Love the Bomb. My favourite scene in the movie is when the Russian ambassador to the US acknowledges that they had indeed made a doomsday machine and that the announcement was to be made shortly. Dr.Strangelove points out that they had missed the most important thing and screams “You gotta let the world know about it!!”.

How very true, when it comes to threats and negotiations. Sure, you could go to all extents to make a resounding, credible threat. But just don’t forget to actually threaten your adversary. As implausible as it may sound, its not all that unlikely a situation. A recent article from HBS attempts to drive home the same point:

“In the classic game of Chicken, two drivers on a crash course speed toward each other. The rules are simple: Whoever swerves first and avoids collision loses, and whoever is brave enough to stay the course wins. Of course, when both drivers stay the course, they collide and die.

Clearly, this is not a game for the faint-hearted. But bravado alone doesn’t guarantee a win. Your opponent has to believe that you’re gutsy enough to stay the course, or he may do the same until the very end.

How do you win at Chicken? Once the cars are headed directly toward each other, you unscrew your steering wheel and throw it out the window, making sure that your opponent sees you do it. Foolish? So it would seem, but your threat is now entirely credible. You can’t change course even if you wanted to. It’s up to your opponent to decide whether to lose the game or die. The odds are in your favor.”

The important part is, of course, “making sure that your opponent sees you do it“.

The same article goes on to point to six ways to make your threats more credible in negotiation: Increase your costs of not following through on your threat, visibly restrict your options, visibly incur sunk costs, delegate authority to someone who will follow through on the threat, create and leverage a reputation for making credible threats and leverage the shadow of the future.

While I personally think some of the methods are a bit too risky and unpredictable for everyday use, the article is a great read for anyone who ever needs to negotiate – even if you don’t employ these tactics, you will know if and when your adversary is.

Posted in Management on June 15, 2005

3 Responses

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  1. Pramod says

    I am now wondering what should I tell you. You are revealing the secrets of my trade for all to see :-) Negotiations and deal making is an amazing area – which is why I am so much enjoying the purchasing function – despite all the lengthy contracts that I have to deal with at the end of negotiations.

    HBS has a very interesting executive education program on Negotiations and long term deal making. In business too – long term deal making esp. with the emergence of those emerging markets (:P) and the growth bigger and bigger corporations its becoming more and more so!

  2. Surya says

    oops sorry, but dun worry..will make sure none of ur competitors read my blog ;o) .. I bet negotiating and deal making would be be a cool job!

  3. Pramod says

    Not my competition, I hope none of my suppliers and future targets read this (eh, did you say you work for a bank? – My, I need to find a better way to brain clean my targets….mmm)

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