Client Counseling Working with Client (and Lawyer) Psychology Thursday, February 25, 2010.

Client Counseling

Working with Client (and Lawyer) Psychology

Thursday, February 25, 2010

February 25, 2010Agenda

• Interactive Presentation

• Working with CLASS CLIENTS

Discussion

NEXT WEEK – ACTING FUN

!!!!!!!!!!!!!!!

Essential Element Working with Client (and Lawyer)

Psychology

Be Aware of Psychological Traps and Tendencies – for you and your clients.

Work with them and around them. Watch out for psychological barriers to wise

decision making. Make framing choices strategically.

Some Psychological Issues Affecting Decision Making

1. Anchoring2. Availability 3. Selective Perception 4. Endowment Effects5. Attribution6. Reactive Devaluation 7. Judgmental Overconfidence9. Framing8. Risk Preferences9. Prospect Theory (Positive and Negative Framing)

Anchoring

Definition: The influence that an initial starting value or position has in determining subsequent values or positions.– Anchoring value can be irrelevant and

inaccurate information.

Old research – Still GOOD!

• 1974, Stanford Profs Tversky & Kahneman showed classes of business school students a roulette wheel, rigged to stop at 10 in half of the classes, 65 at another. Student were asked to estimate the number of African countries belonging to the UN.

• Roulette wheel at 10, median was 25 countries

• Roulette wheel at 65, median was 45 countries

This Class at UC Law!ANCHORING; CONFIDENCE; RISK AVERSION

Liab% Damages Settlement

Predicting What’s Probable 76.6% $1,837,500 $1,894,889

Kentucky Case won $6,000,000 (incl $3,000,000 P)

Calculations in Confidence81.04% $2,383,333 $1,750,000

Note: without outliers – high and low (6 resps, took out 2)$1,675,000 $1,350,000

Kentucky Case won $300,000 (incl. $150,000 P)

Liab% Damages SettlementFinally A Great Case

76.48% $3,855,556 $2,088,889Kentucky Case lost - offer had been $300,000

Betting on This One79.55% $5,533,333 $3,605,556

(66.3%)Kentucky Case lost - Offer had been $6,000,000

This class at UC LAWAnchoring in Loss Territory

Now we see it!

UC LAW 2L’s –Past!ANCHORING; CONFIDENCE; RISK AVERSION


Predicting What’s Probable 79.6% $4,580,000

$2,668,000

(Discount = 58.25%)Kentucky Case won $6,000,000 (incl $3,000,000 P)


(Discount = 48.19%)Kentucky Case won $300,000 (incl. $150,000 P)

Anchoring in Loss Territory


Finally A Great Case76.48% $1,606,296 $1,128,888

(70.28%)Kentucky Case lost - offer had been $300,000



UC LAW 2L’s –2008!ANCHORING; CONFIDENCE; RISK AVERSION


Predicting What’s Probable 76.666% $5,003,571 $2,292,667

(45.82%)Kentucky Case won $6,000,000 (incl $3,000,000 P)


(69%)Kentucky Case won $300,000 (incl. $150,000 P)

Anchoring in Loss Territory


Finally A Great Case77.81% $3,596,875 $1,572,500

(43.71%)Kentucky Case lost - offer had been $300,000



Summary Anchoring AnalysisVanderbilt Prof Guthrie & Atty Dan Orr

Analysis of many many many subsequent studies concludes:

• For every $1 increase in anchor, final settlement up $.497.

• Among seasoned negotiators, every $1 increase, final up $.37.

• Even highly unreasonable anchors affect outcomes.

Availability

• Definition: A rule of thumb in which decision makers assess the frequency of a class or probability of an event by the ease with which instances or occurrences can be brought to mind.

• Example: Are there more murders or suicides in the United States?

• Question: What are the implications for client counseling?

Selective PerceptionThe tendency for people to see or hear what

they expect or want to see or hear.• Your performance on this

assignment was great - you are good at sales - but I am very concerned about a general lack of administrative follow through, which creates serious problems for our business.

There’s a good possibility that we may win…

My boss thinks I’m great. He would like it I would be better about paperwork, but that’s not important.

Good news – we’re likely to win

Endowment EffectEmpirical finding that people tend to value

goods more when they own them than when they do not

Buy a mug? – Subjects given a mug valued it at much higher

price ($7.12) than those given money and permitted to buy the mug ($2.87), or than those permitted to choose the mug or money ($3.12).

What’s mine is better

Working with Endowment Effect

• To avoid endowment effect– Frame as joint problem– Create distance between item and client

• To engender endowment– Create ownership in the process and

progress to date– Frame process as an investment

How Many “Fs” Do You See?*

These functional fuses have been

developed after years of scientific

investigation of electric phenomena,

combined with the fruit of long experience

on the part of the two investigators who

have come forward with them for our

meetings today.

* Do not count the “F” in the title or in this note!

Selecting….see the series

2, 4, 6

• Goal is to find the rule.

• Unlimited “tries” with other sequences…

• Only one guess (per person) at formulating the rule….

Judgmental OverconfidenceAlso Partisan Perception Bias and Selective Perception at UC LAW:

Bio-Con Microtex UC LAW STUDENT BUSINESS STUDENT NEGOTIATION

Bio-Con Attys

(Plaintiffs)

Microtex Attys

(Defendants)Avg. Percentage of Estimated Liability 84.3% 44.69 %

Avg. Estimated Damages Award

$12,958,000 $1,505,555

Partisan Perception Bias and Selective Perception at UC LAW:

HAPLESS HARVEST - Reversing the Trend

Liability Damages

Plntiff’s Attys 43.75% $49,922

Dfnse Attys 51.57% $60,081

Judgmental Overconfidence

• Definition: Tendency to be unrealistically confident of our own ability to predict

• Some research findings: – Is greatest when accuracy is near chance.– Diminishes when accuracy nears 80%.– Is not related to intelligence.– Can be reduced by intensive performance feedback.

• Some remedies– Build in performance feedback after negotiating (negotiate in

teams)– Stop to consider reasons your judgment might be wrong (not why it

might be right).

Confidence and Commitment

Once people have committed, they tend to be more confident in their choices!

But the horses don’t get any faster!

The outcome doesn’t become more certain!

Reactive Devaluation

• Definition: Tendency of parties in conflict to devalue, or discount, assertions made by, or concessions offered by, the other side.

• Reactive devaluation occurs due to:– mistrust of the source;– skeptical scrutiny and reevaluation of what will be gained.– change in preference due to availability (We value more what we

don’t have.)

• It is strongest when concessions are offered unilaterally, followed by request for reciprocation.

• Reactive devaluation can be rational: – Willingness to offer may provide information about actual value.

Attribution Theory

• The study of how and why we explain the actions of others.

Some Key Insights About Attributions

• People tend to engage in attributional behavior, regardless of background, education, or other variables.

• There is a Fundamental Attribution Error: – People tend to infer the behavior of others is related to

dispositional factors, rather than situational factors.

• There is a corollary to the FAE: – People tend to attribute their own behavior to situational factors,

rather than dispositional factors.

How Attributions Affect Client Counseling

• There is a critical link between attribution and behavioral responses (often fueled by emotion)

• Parties in conflict develop understandings, or stories, based on those attributions

• Often, the parties have VERY VERY VERY EXTREMELY different perceptions of what the story is.

• Their understanding of “the story” influences what they will want to resolve their dispute.

Prof Aaron on Attributing Meaning

• Mixed into ideas about “framing” (next topic) is the notion that people seek and ascribe MEANING to what happens to them, to what they do…

• WE CREATE NARRATIVES• A helpful and legitimate role for a lawyer to play

is to FIND ALTERNATIVE AND HELPFUL MEANING!!!!!………… by shifting perspective………….by normalizing

………………………………EXAMPLES??????

Framing

The idea that our judgments and decisions about information, events, motives, etc., can depend upon the manner in which it is presented to us.

FRAME MATTERS

• Metaphors provide mental and emotional frames. Metaphor is the language of leadership and of negotiators - choose and use the power of metaphor wisely.

• Reframe to open and change the negotiation game: positions to interests, proposals to options, lines in the sand to data points.

• Strategically Frame as Gain or Loss: use the power of positive and negative reference points

Effects of Framing(Harris 1973; Loftis 1975)

Do you get headaches frequently? If so, how often??2.2/week

Do you get headaches occasionally? If so, how often??.07/week

How long was the movie? (minutes) 199 How short was the movie? (minutes) 130

How tall was the basketball player? (inches) 79How short was the basketball player? (inches) 69

Reckoning with Uncertainty: Risk

• Risk aversion – People prefer a smaller sure gain over an uncertain

larger gain (bird in the hand)– People will pay a great deal for COMPLETE

certainty (see small % chance as larger)

• Risk seeking– People will seek risk to avoid certain loss– This is often TRUE even when what is risked is

large

Risk Choices

• Decision 1 - Choose between:– a. A sure gain (receipt in settlement) of $240– b. A 25% chance to win $1,000 and a 75% chance to win

nothing.

• Decision 2 - Choose between:– c. A sure loss (settlement payment) of $750– d. A 75% chance of losing $1,000 and a 25% chance of losing

$0.

• In Tversky and Kahneman’s experiment, 84% chose a (a sure gain, lower than the expected value); 87% chose d (a 75% chance to loose $1,000)

The Plant Closing Problem

• Choose Between:

– Plan A: This Plan will save one of three plants and 2,000 jobs.

– Plan B: This plan has a 1/3 probability of saving all three plants, but has a 2/3 probability of saving no plants and no jobs.

• Choose Between

– Plan C: This plan will result in the loss of two of the three plants and 4,000 jobs.

– Plan D: This plan has a 2/3 probability of resulting in the loss of all three plants and all 6,000 jobs, but has a 1/3 probability of losing no plants and no jobs.

The Explanation

• Most people choose A and D.

• The problems are identical. The way the question is framed affects the reference point.

• If the problem is framed in terms of losing jobs and plants (Plans C and D), the current position of having three plants open forms the reference point.

• If the problem is framed in terms of saving jobs and plants (Plans A and B), the potential disaster of losing everything becomes the reference point.

Prospect Theory(Kahneman & Twersky, with Bazerman’s help)

• People do not make decisions in accordance with expected value or expected utility.

• There is a systematic pattern of how the framing of a problem -- as resulting in gain or loss from a neutral reference point -- causes decision-making to vary from expected value and expected utility theory.

• We tend to avoid risk concerning gains and to seek risk concerning losses

• Our responses to losses are more extreme than our responses to gain. Or, the pain associated with losing $ X is generally greater than the pleasure associated with winning $ X.

• We tend to overweight the probability of low probability events and underweight the probability of high probability events.

Prospect Theory

• People evaluate decisions from a reference point.

• The way you frame the problem – present the reference point – will affect their decision– Frame POSITIVELY as faced with a certain gain

from a reference point – they will choose the certain gain over the risk.

– Frame NEGATIVELY as faced with a certain loss from a reference point – they will choose the risk over taking the loss.

FRAMING MATTERSRECOGNIZE HOW YOUR FRAME AFFECTS YOUR

CLIENT’S DECISION

Applying Psychology: From Patterns to Prescriptions

Exit AngstYou have been working diligently to negotiate a separation between your client, a commissions salesman and his employer corporation. Your client owns a significant minority share of the stock and would like a release of his non-compete in exchange for his stock. The company has offered to permit him to compete for a limited set of clients, with a percentage of the revenues to be shared, and to compete for any non-company clients. Your client rejects the offer out-of-hand because it is not the exchange of stock for competition he had wanted.

Use psychology to talk with your client.

A Reasonable Move

You have been negotiating over the terms for sale of a small trucking business. There are a number of outstanding issues yet unresolved. After an internal review (and property inspection), your client has decided that it feels comfortable offering to indemnify the new purchaser for any environmental liabilities on the site based upon actions prior to the sale date.

How should you handle this?

Client, Thy Name is Fickle

You are negotiating the break-up of a business partnership. When your client seems to agree on a set of proposed terms, you communicate those terms (with some wiggle room) to the other side. Typically, the lawyer for the other side talks with his client and returns with a counter proposal that is not too far from your client’s proposal. As soon as this happens, your client backs away and wants either to greatly increase his demand within the structure he proposed, or comes up with an entirely different structure and quite aggressive demands. This has happened repeatedly. What is going on? What can you do?

Injurious Realities

The judge is likely to ask about settlement in tomorrow’s scheduling conference. Your client tripped over a cone by the door to a convenience store, suffering a concussion and cranial fracture. This caused some cranial fluid to leak, which was extremely painful and required a horrific testing and internal cauterizing procedure. There is a threshold liability hurdle. The defense has moved for summary judgment based on the “Open and Obvious” doctrine.

Your client was insured. Her out-of-pocket losses were $8,000. Your complaint stated a demand of $500,000. The defense’s response was “nuisance value” - $10,000. You proceeded through discovery.

The defense attorney just called with a “fair and reasonable, serious settlement offer of $75,000.” You can see that’s not a bad offer. It might be negotiable up to $85,000 or $90,000. But, your client previously talked about wanting $150,000 or $200,000.

Suggest to your client that settlement in the $75,000 - $90,000 range would be worth taking. Pay attention to the way you frame your suggestion.

Defensive Dollars

You are counsel for the defendant convenience store chain. Anticipating that the judge will ask about settlement, you decided to approach your client contact, the CFO, about increasing his offer to a number that should settle the case. You see the case as risky. While there is a pretty good chance of summary judgment under the “plain view” doctrine, if it does go to trial, a jury award could be VERY high. The plaintiff’s injuries were serious and the treatment downright horrific. The idea of “leaking cranial fluid” will elicit jury emotion. The award could reach $200,000 - $300,000. Your fees could be $30,000.

You want the CFO to authorize you to convey a reasonable settlement offer - $75,000. You believe the plaintiff might accept something in that range. You would ultimately recommend settlement at $100,000 or even a bit higher. (You want to leave some “wiggle room,” but you also want to be able to say this is a serious offer that should be considered.) You anticipate client resistance.

Ask for authority to offer $75,000 as a reasonable settlement figure. Pay attention to the way you frame it!

Other Examples of Psychology in Action????

Client Counseling Working with Client (and Lawyer) Psychology Thursday, February 25, 2010.

Documents

Transcript of Client Counseling Working with Client (and Lawyer) Psychology Thursday, February 25, 2010.