What is Costing?
"I never...went under the illusion that I could appeal to their higher good. That may come, that might be what brings them along further, but it's not going to be what gets them to engage (in mediation). The thing that's going to get them to engage is what it's going to cost them if they don't. And what's it going to cost (if they do)? Is it (mediation) worth trying?" -- Nancy Ferrell, Community Relations Service mediator
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Costing (or cost-benefit analysis) is the process of analyzing the costs and benefits of different options to determine 1) what approach should be taken to a particular conflict and 2) what solution or resolution should be chosen once various options are being considered.[1] Thus, costing happens early on in the process as parties decide whether they should respond at all, and if so, how; and later on once settlement possibilities have been identified.
Early-Stage Costing
This type of costing involves an assessment of whether the conflict is worth pursuing or whether the issue should just be dropped. If it is worth pursuing, what strategy should be used? Some sort of persuasive tactic (such as a public relations campaign)? Direct negotiation? Mediation? Arbitration? Litigation? Coercion or force? Generally the stronger the strategy, the higher the costs. In addition to concrete costs such as legal fees or military casualties, it is important that intangible factors such as personal anxiety, damaged relationships, reinforcement of hostilities, and the "backlash coefficient" be considered as well.[2]
Latter-Stage Costing
Once parties are involved in negotiation and/or mediation, a list of settlement options is usually developed (see option identification) and the parties then need to assess the relative benefits and costs of each of these options, comparing them to their BATNAs-their "best alternative to a negotiated agreement."
"The central task of the parties at [the costing] stage is to assess how well their interests will be satisfied by any one solution or any combination of the solutions that have been generated," explains mediator Christopher Moore.[3] Costing also requires an assessment of one's ability to implement the option with or without outside help, the likely costs of implementing that approach, and the probable reactions of opponents and decision makers. For instance, extremely negative or antagonistic responses raise the cost of the strategy. It is also important to try to anticipate future disputes. Options that produce short-term victory may not be desirable if they also strengthen the backlash effect, which will likely increase the number of future disputes and reduce one's chances of protecting one's interests over the long term.[4]
How is Costing Done?
Additional insights into costing are offered by Beyond Intractability project participants.
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Parties in conflict make strategic decisions on how to pursue the conflict based on assessments of the likelihood of success and the potential costs of carrying out the conflict. Oftentimes parties will underestimate the costs and overestimate their potential for success. This leads them to pursue strategies that do not advance their interests.[5] To prevent this problem, conflict resolution professionals (mediators and negotiators) often assist with the costing process. They ask hard questions: "What makes you think you can do that?" "Where will you get the money?" "Who supports this decision?" "How will the opponent respond?" "What makes you think so?" "Does everyone agree?"
By challenging assumptions and forcing the parties to justify their assessments, the parties usually develop a more realistic assessment of the costs and benefits of the options being considered. If the mediator thinks that the answers given are unrealistic, he or she may urge the parties to check further, perhaps by consulting a lawyer, military planners, outside observers -- anyone who can give them a more accurate assessment of the current situation and likely future scenarios.
The Importance of BATNAs
In addition to assessing settlement options, parties must also assess the costs and benefits of their "BATNA" -- Best Alternative to a Negotiated Agreement. "That is the standard against which any proposed agreement should be measured. That is the only standard which can protect [parties] both from accepting terms that are too unfavorable and from rejecting terms it would be in [their] interest to accept."[6] Once parties establish a BATNA, they must then compare the costs and benefits of the BATNA to all of the settlement options on the table.
Community Relations Service (CRS) mediator Nancy Ferrell used to use the costing process to get people to come to the table by asking, "What's it going to cost you if you don't?" (In other words, how much is your BATNA going to cost?) Often the parties who were reluctant to negotiate would realize that negotiation (or in this case, mediation) was likely going to produce more benefits more quickly than any other option -- and in CRS cases, the cost was very low, as the CRS provides mediation for free. So the only costs were time. But alternative processes, Ferrell would point out, would generally take longer, cost more financially, and might fail to produce results as good as those that were likely to come out of mediation. Though it didn't work in all cases, Ferrell (as well as other CRS mediators) reported considerable success with that approach.[7]
The decision about whether to enter into a conflict, stay in the conflict, and what agreement to reach are not just rational, they are emotional as well. Psychologists have repeatedly shown that people who value A over B and B over C still might not value A over C. So rational cost-benefit analysis is only one part of the strategy forming process. But it is a necessary part...absent such an assessment and one's strategy or tactics are considerably less likely to result in the desired or expected outcome(s).
[1] International Online Training Program on Intractable Conflict, "Strategic Option Identification and Costing" [article online] (Conflict Research Consortium, 1998, accessed on 11 February 2003); available at http://www.colorado.edu/conflict/peace/treatment/optioniv.htm; Internet.
[2] Heidi Burgess and Guy M. Burgess, Encyclopedia of Conflict Resolution. (Denver: ABC-CLIO, 1997), 83-84.
[3] Christopher Moore, The Mediation Process: Practical Strategies for Resolving Conflict. (San Francisco: Jossey-Bass Publishers, 1996), 269.
[4] Heidi Burgess and Guy M. Burgess, op. cit 83.
[5] Ibid.
[6] Roger Fisher and William Ury, Getting to Yes: Negotiating Agreement Without Giving In. (New York: Penguin Books, 1981), 104.
[7] Interview with Nancy Ferrell, 2000. Transcription available online at http://www.colorado.edu/conflict/civil_rights/interviews/Nancy_Ferrell.html and particular segment referenced available at http://www.colorado.edu/conflict/civil_rights/segments/iseg-101732.html; Internet.
Use the following to cite this article:
Spangler, Brad. "Costing." Beyond Intractability. Eds. Guy Burgess and Heidi Burgess. Conflict Research Consortium, University of Colorado, Boulder. Posted: June 2003 <http://www.beyondintractability.org/essay/costing/>.
Sources of Additional, In-depth Information on this Topic
Additional Explanations of the Underlying Concepts:
Online (Web) Sources
Mitchell, Christopher R. "Cutting Losses: Reflections On Appropriate Timing." , January 1, 1996
Available at: http://www.ciaonet.org/wps/mic01/.
This paper contributes to the debate about the circumstances likely to result in a restoration of realistic costing and a movement from antagonistic to conciliatory behavior. The author provides a detailed analysis of Zartman's and others' pioneering work in this area and evaluates the Hurting Stalemate, Imminent Mutual Catastrophe, and Entrapment models as inducements to negotiated problem solving. He counterposes an Enticing Opportunity model to these "exhaustion" models and suggests that positive inducements to change may be as effective or more effective than anticipated costs as a motivator in changing violent behavior.
Burgess, Guy M. and Heidi Burgess. Environmental Mediation: Beyond the Limits Applying Dispute Resolution Principles to Intractable Environmental Conflicts. University of Colorado: Conflict Research Consortium.
Available at: Click here for more info.
This paper examines the limitations of environmental mediation. The discussion includes techniques for lowering the costs of power contests. According to the authors, such power contests are needed to assess parties' alternatives to agreement.
"Strategic Option Identification and Costing." ,
Available at: http://www.colorado.edu/conflict/peace/treatment/optioniv.htm.
This page offers a summary of principles of strategic option identification and the process of costing those options. The bottom line is that parties involved in negotiation should develop a list of all the toption available to them, and then systematically assess which ones have the most potential to advance their interests. This page also includes suggestions for further reading on these topics.
Offline (Print) Sources
Moore, Christopher W. "Assessing Options for Settlement." In The Mediation Process: Practical Strategies for Resolving Conflict, 2nd Edition. San Francisco: Jossey-Bass Publishers, 1996. Pages: 269-279.
This chapter of The Mediation Process outlines a rather technical procedure for assessing or costing settlement options generated during the course of mediation. The procedure is designed to help parties determine the costs and benefits of the potential outcomes of various options. Click here for more info.
Kramer, Henry S. "Costing Your Plan and the Other Side's Proposals ." In Game, Set, Match: Winning the Negotiations Game. New York: Alm Publishing , 2001. Pages: 113-147.
This chapter of Game, Set, Match covers the process of costing in commercial negotiations. The costing process outlined in this chapter is primarily about estimating financial costs that will be incurred under certain business agreements.
Burgess, Heidi and Guy M. Burgess. "Definition of Costing." In Encyclopedia of Conflict Resolution. ABC-Clio, November 1997. Pages: 83-84.
This section of the Encyclopedia of Conflict Resolution offers a brief discussion of the process of costing.
Fisher, Roger, Elizabeth Kopelman and Andrea Kupfer Schneider. "Focus on Their Choice ." In Beyond Machiavelli: Tools for Coping with Conflict. Cambridge, MA: Harvard University Press, April 1, 1994. Pages: 42-59.
This chapter includes a discussion of how to build a "table of consequences" that can help in making cost estimates of different settlement options in negotiation. Click here for more info.
Crocker, Chester A. "Lessons on Intervention." In Managing Conflict in the Post-Cold War World: The Role of Intervention. Edited by Aspen Institute Conference, ed. Aspen Institute, January 1, 1996.
Traditional, interstate conflicts are on the decline. Internal conflicts such as civil wars or ethnic conflicts are increasing. Internal conflicts have proven to be difficult to resolve by intervention. Still, the cost of letting such conflict go unchecked is often very high, and so effective means of intervention must be developed.
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Examples Illustrating this Topic:
Online (Web) Sources
Ferrell, Nancy. Civil Rights Mediation Oral History Project - Nancy Ferrell Interview. Conflict Management Initiatives.
Available at: Click here for more info.
In multiple places throughout this interview, Ferrell dicusses how she used the question, "What is it going to cost you?", to motivate people to sit at the mediation table.
Offline (Print) Sources
Kriesberg, Louis. "The Negotiation of Agreements." In International Conflict Resolution : The U.S.-USSR and Middle East Cases. New Haven, CT: Yale University Press, May 1, 1992. Pages: 121-150.
In this chapter, Kriesberg discusses the negotiation process, including the role of the third party mediator. One role of the third party, Kriesberg says, is to help disputants assess their alternatives, comparing the costs of a negotiated settlement to the costs of continuing the conflict. The chapter draws on several concrete examples from US-USSR and Arab-Israeli negotiations. Click here for more info.
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