6/30/2005

Making Your Threats Credible

'This is the dilemma confronting negotiators who make threats: Your threat will be credible only if the other side believes it's in your best interest to follow through—yet you probably made the threat at a point when the other side doubted your resolve. After all, if it were obvious that you were ready to walk away, you wouldn't have had to threaten at all!

As this paradox highlights, the credibility of threats is always in question. What follows are six ways to make your threats more credible in negotiation.

1. Increase your costs of not following through on your threat...
2. Visibly restrict your options...
3. Visibly incur sunk costs...
4. Delegate authority to someone who will follow through on the threat...
5. Create and leverage a reputation for making credible threats...
6. Leverage the shadow of the future...

As many of the strategies suggest, sometimes the best way to make your threat credible is to act in a way that would normally be considered irrational. Restricting your options, sinking money into a potentially useless enterprise, and surrendering authority are the types of behaviors that smart negotiators usually try to avoid. It is critical to understand, however, that these tactics don't work because they make you seem irrational or unpredictable but because they fundamentally alter your strategic options and those of your counterpart.

Read more in this HBS Working Knowledge article.