Harvard Business School Working Knowledg e Archive

Use Deadlines for Powerful Negotiations

9/6/2004
You can use deadlines to your strategic advantage in negotiations—but so can your opponent. Here's how to make the most of time pressure. From Negotiation.

In the summer of 1998, National Basketball Association (NBA) team owners and players were at loggerheads over their new contract. At midnight on June 30, the owners declared a lockout, halting preparations for the start of the 1998-99 NBA season. The players and owners negotiated for six long months, during which time the two sides collectively lost hundreds of millions of dollars.

In the end, it was a deadline that resolved the conflict. The team owners declared that if they didn't reach an agreement with the players by January 7, 1999, they would cancel the rest of the season. In effect, the owners placed a final, arbitrary deadline on their participation in the negotiations; the chosen date had little significance to either side. Through public statements, the owners committed themselves to declaring an impasse if the deadline came and went. In the early-morning hours of January 6, the two sides agreed to contract terms that dramatically favored the owners.

When it comes to moving stalled negotiations forward, deadlines are essential. We're all familiar with stories of tough opponents who bargain for months without making progress, only to reach resolution in the final moments before the passage of a critical deadline. Without a deadline, negotiators are tempted to use stalling tactics, hoping to pressure the other side into giving in.

Despite the proven effectiveness of deadlines, they remain one of the most misunderstood negotiation strategies. Many negotiators hesitate to place a deadline on their talks. After all, having a deadline reduces your freedom and puts pressure on you to reach an agreement quickly. In my research, when I ask people to predict the effect of deadlines on negotiations, even experienced negotiators predict that the presence of a shared deadline will hurt them by forcing them to concede more quickly than they would like, thereby helping their opponents.

While there is some truth to these assumptions, it's also true that deadlines increase pressure on the other party to reach an agreement. This article explains why this fact should change the way you look at deadlines and advises you on whether to reveal your deadlines to the other party.

Deadlines: A two-way street
Perhaps it's no surprise that negotiators make the mistake of avoiding final deadlines. After all, a best-selling negotiation book warns negotiators of the perils of deadlines. In his 1980 bestseller, You Can Negotiate Anything (reissue ed., Bantam, 1982), Herb Cohen tells the story of his first big business negotiation. His company sent him to Japan to deal with a Japanese supplier. When he arrived, his hosts asked him how long he would be in Japan. Cohen told them that he would be leaving in a week. He spent much of that week being entertained at various parties, tours, and outings. His Japanese counterparts didn't open up serious talks until the day before Cohen was due to leave, and the parties hammered out the final details of the agreement during the car ride to the airport. Cohen was sure that the resulting agreement favored the other side and that he had conceded too much under the deadline pressure of his departing flight.

Negotiators who recognize that deadlines affect everyone equally can use them to defuse costly stalling tactics.

Cohen may well have been nervous about what his boss would have said if he had left Japan without an agreement. Of course, it's also true that Cohen's negotiating partners could not have claimed victory if he had left the country without a deal. That's the key to deadlines: When the negotiation is over for one side, it's over for the other side, too. In his article "The High Cost of Close Focus" in our July 2004 issue of Negotiation, Max Bazerman showed how an overly narrow focus can harm negotiators at the bargaining table. People routinely make the mistake of focusing on how a deadline will affect them while failing to appreciate how the same circumstance will affect others. (See the sidebar "Short-Sighted Confidence.")

Negotiators who recognize that deadlines affect everyone equally can use them to defuse costly stalling tactics. For example, car salespeople sometimes try to draw out price negotiations, hoping the amount of time you've invested will increase your commitment to making the deal. To defuse this strategy, try beginning your negotiation for a new car by informing the salesperson that you have only an hour to make a possible deal.

One of the most natural deadlines to use is your counterpart's eagerness to get home at the end of the day, as Robert Ippolito, executive vice president of operations at Pacific Cycle, described in 2000 in MBA Jungle magazine:

On one of my first business trips to China, I had a meeting with the head of a factory to work out a large purchase. I arrived at 9:00 a.m. This guy was stubborn as hell, and we spent seven hours haggling. At a few minutes before 5:00, he started making concessions, and we were able to sign the deal. I turned to my interpreter and asked why we couldn't have closed the deal at 9:30 rather than at 5:00. He told me that the official had no incentive to wrap up earlier in the day, but now he wanted to go home. The next time I visited that factory, I scheduled our meeting for 4:00, and things went fast and easy. Now when I walk into any negotiation, I announce that I have another appointment in, say, one hour. If that hour comes and goes and I feel it's to my benefit to stay, I ask to borrow a phone, call my secretary, and tell her to rebook my "other appointment." This only adds to my power in the negotiation because the other party sees it as an act of good faith, even as a concession.

Because deadlines put pressure on everyone, they can get talks moving again. Don't be afraid to set deadlines and commit to them.

Should you disclose your deadlines?
What if you have a deadline that the other side doesn't know about? Should you tell? No, says Cohen, who concludes that he got the short end of the stick in his Japan negotiation because, "They knew my deadline, but I didn't know theirs." Most negotiators, assuming that a deadline represents a strategic weakness, follow Cohen's advice intuitively and fail to disclose their time pressure.

In fact, this strategy puts you—the negotiator with a deadline—in the worst position possible! I've found in my research that negotiators who hide their deadlines dramatically increase the risk of an impasse. Knowledge of your deadline compels you to accelerate your concessions. Meanwhile, believing there's still plenty of time to talk, your counterpart will be content to hold out and wait for you to concede first. Her stalling increases the odds that you'll fail to reach agreement before time runs out. If you do come to an agreement before the deadline, your outcome is likely to be highly disadvantageous because you gave up so much in your secret race for a deal.

When negotiators tell their opponents about an existing final deadline, they get better deals. Why? First, because both sides are more likely to work toward an agreement before the deadline passes, you reduce your risk of walking away with nothing. Second, when an opponent knows about your deadline, he'll make concessions much more quickly. The NBA owners' January 7 deadline would have been useless if they had kept it secret; the players' union would have kept negotiating past the deadline.

It's wise to tell your fellow negotiators about your deadlines. This advice holds true even when you have little power and are desperate to make a deal. A "one-sided" deadline will only put more pressure on you to concede quickly.

The effects of time costs and BATNAs
Two cautionary notes apply to the question of whether to disclose your deadlines. First, don't confuse deadlines with time costs. Final deadlines end the negotiation for both sides, while time costs apply to only one negotiator. For instance, if you're negotiating with someone over a potential legal settlement in a court case, the time costs of your high-priced law firm affect only you. The more time passes without a settlement, the higher your legal fees. Telling your opponent that you just hired ten more attorneys to work on your case would give your opponent a powerful threat of delay. What should you do if your opponent finds out about your time costs and starts stalling? Try to impose a final deadline on both sides, such as moving up the court date.

When negotiators tell their opponents about an existing final deadline, they get better deals.

Second, when disclosing a deadline, carefully consider whether you should also reveal your BATNA—your best alternative to a negotiated agreement. When your BATNA is strong, you may want to share it with the other side. When your BATNA is weak, you may choose to keep it secret. It's possible to hide your BATNA while revealing your final deadline. Suppose you're moving to Europe in a week and are in a hurry to sell your car. Without revealing your weak BATNA (giving the car to a friend or putting it in storage), you could simply tell the prospective buyer that yours is a "one day only" offer. The deadline need not imply a weak bargaining position. Indeed, people with the busiest schedules and the most deadlines often have the best BATNAs.

In negotiation, you'll have many opportunities to use deadlines strategically. Don't be afraid to set them and to reveal them.

Reproduced with permission from "Deadline Pressure: Use It to Your Advantage," Negotiation, Vol. 7, No. 8, August 2004.

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Don A. Moore is an assistant professor at Carnegie Mellon University's Tepper School of Business. He received his PhD in organizational behavior from Northwestern University. He can be reached at negotiation@hbsp.harvard.edu

Short-Sighted Confidence

by Don A. Moore

The mistakes we make about deadlines, such as failing to set them or to reveal them, are often rooted in focusing errors. In one experiment, my colleagues and I pay college students for showing up and taking a trivia quiz. Half of the participants get an easy trivia quiz and half of them get a difficult quiz. The easy quiz poses questions such as, "How many inches are there in a foot?" By contrast, the difficult quiz asks, "What is Avogadro's number?" After participants have taken one quiz or the other, we invite them to bet on whether their score will exceed that of an opponent chosen randomly from among others who took the same quiz.

In numerous studies with hundreds of participants, we've found that people who take the easy quiz bet far more money on their ability to beat others than do those who take the difficult quiz. Furthermore, after taking the easy quiz, most participants express certainty that they performed above average, while those taking the difficult quiz tend to believe they scored below average. Participants focus on how difficult they found the quiz to be and fail to appreciate that it will be similarly difficult for others. Likewise, negotiators focus on how a deadline will affect them and ignore the fact that it will affect others in the same way.

Reproduced with permission from "Deadline Pressure: Use It to Your Advantage," Negotiation, Vol. 7, No. 8, August 2004.