With a hint of self-mockery, a well-known US mediator declared himself “the master of bracketology.” For those in doubt, you won’t find “bracketology” in the Oxford English Dictionary, but the art and science of deploying brackets in the context of the mediation process is an “ology” worthy of study.
One might first consider why brackets are helpful in a mediation. A scenario familiar to all mediators is “offer alienation”: offers are made grudgingly in small increments, and a substantial gap between the parties remains. Every offer appears to entrench each side’s view that the other is either not prepared to put up “real money” or is utterly unrealistic.
When the gap remains large and each offer drives resentment, a walk-out by one party becomes an increasing likelihood. Mediators strive to get parties to table reasonable offers, but aren’t always successful, and while much has been written on countering “positional bargaining”, for many users of mediation it’s the negotiation methodology they most trust, and one which has no doubt been used to good effect in other aspects of business. Persuading them to take a different path in dispute resolution can prove unproductive.
Using brackets to maintain momentum
One way of entertaining parties’ preference for positional bargaining while maintaining momentum towards a deal is through brackets. In simple terms a bracket is an “if, then” hypothetical offer: if the defendants go to £500,000, then we, the claimants, will drop our demand to £800,000. Counter brackets usually follow: we’ll go to £250,00 if the claimant drops to £400,000. Typically several rounds of brackets might be exchanged until the parties edge towards a zone of possible agreement. At this point, the parties may switch from hypothetical brackets to unconditional numbers.
Brackets are deceptively simple, but like all aspects of negotiation, they can be executed with finesse or the reverse: calibrating the low and the high of the bracket in anticipation of its reception by the counterparty is where shrewd and intuitive negotiators prevail.
5 reasons why brackets are effective in the mediation process
- Shifting Focus. Brackets can help parties shift attention from disappointment with the other side's proposals and toward their own negotiating objectives. When parties fixate on the size of the other side's movement, they tend to get trapped in a vicious "tit for tat," cycle of reactive bidding in which the moves, and the chances for resolution, get increasingly smaller.
The exercise of constructing a bracket helps parties break free from that counterproductive dynamic and strike a positive, constructive tone. By offering a bracket, a party in effect says: "What really matters is not the size of the moves so far, but the number that can settle this case. Here is a bracket defining what we think is a reasonable negotiation range.
- Communicating Where a Party Is Heading. Proposals that take the form of an unconditional number typically provide very little information beyond the number itself. Limited to such proposals, the parties in the above scenario lack a tool for communicating signals about where they might be heading and how far apart they actually are from each other. A bracket provides that tool.
A bracket also communicates helpful information about the parties' expectations. Bargaining without brackets can involve a fair amount of guesswork. A party may think it is making a significant move but then learn its counterpart was expecting much more, leading to frustration and disappointment on both sides. However, when our claimant offers a bracket with a lower end of £350,000, it is clearly communicating: "We think £350,000, although not enough to settle the case, is a reasonable next move for defendant to make." That information helps defendant formulate an offer that will have predictable consequences—the closer defendant is to £350,000 on its next move, the more likely claimant will react positively. The same holds true for defendant's counter-bracket: it sends the message that claimant must come below £400,000 to be in what defendant regards as a "reasonable" settlement range. In this way, brackets help reduce the guesswork and resulting misunderstandings that can derail a mediation.
- Encouraging Significant Moves. Because a bracket is a conditional ("if, then") proposal, it provides a kind of protection that tends to encourage "significant" moves. A party contemplating a significant, unconditional move will typically worry about what happens if the other side refuses to reciprocate with a significant move. It might be concerned about "running out of room," "signalling weakness," or having the number used against it (setting a "floor" or "ceiling") in future negotiations. These concerns, while valid, tend to eclipse all other considerations and limit a party to making small moves, which may not be the most effective strategy.
The conditional nature of a bracket allows parties to "test" or signal a significant move without actually making one. If a proposed bracket is rejected, the numbers in that bracket, at least formally, cannot later be used against the offering party. This provides a kind of "protection" that helps spur significant movement. By bracketing £800,000 with a demand that defendant come up to £350,000, a claimant can signal a dramatic movement—dropping from £1.4 million to £800,000 in one move—without jeopardizing its bargaining position. The same holds true for the defendant's counter-bracket: It allows defendant to signal a substantial move (doubling its offer from £125,000 to £250,000) without making a firm commitment to settle at that amount.
- Generating Momentum. By encouraging significant moves, bracketing tends to create a positive negotiating atmosphere and the possibility of a "domino effect" of significant movement. Because brackets tend to represent significant movement, they tend to be interpreted as a signal that the offering party is "serious" about settlement. And although parties worry about making large moves that go unreciprocated, large moves frequently induce large moves by one's counterpart.
After trading a series of significant, bracketed moves, the parties would likely experience a sense of real progress and negotiating momentum that could be instrumental in settling the case.
- Keeping Negotiators at the Table. Brackets work because they often keep parties negotiating until they are ready to signal or reveal their true bottom lines. Parties typically will not (and indeed should not) reveal their best numbers when a settlement seems out of reach. By the time our hypothetical mediation threatens to fall apart, it is probably too late in the day to continue to exchange unconditional numbers productively, yet far too early in the day for the parties to reveal to each other "best and final" numbers.
Bracketing works as a kind of bridge that helps carry negotiators far enough toward the other side, and far enough into the negotiating process, that they are prepared to reveal their cards and see whether resolution is possible. It serves the very practical function of keeping parties at the table when further bargaining seems, but is not in fact, hopeless.
A longer version of this article by Michael Young and Marc E Isserles is available in the New York Law Journal