August 2, 2017
By Chuck Doran and Megan Winkeler
If you read MWI’s Negotiation & Mediation Blog or want to improve your mediation or negotiation skills, you’ve probably encountered the term BATNA. Understanding and utilizing your BATNA is a significant source of power in negotiations. But what does this strange acronym stand for, and why does it matter so much?
Using negotiation lingo, alternatives are what you could do to meet your interests if you walked away from the current negotiation. The alternative that best meets your interests is called your BATNA (Best Alternative To a Negotiated Agreement). Understanding these concepts and how to utilize their power in negotiations will help you reach more satisfying outcomes in your negotiations.
Jill needs a car, so she’s negotiating with Jack to buy his 1979 AMC Pacer. Jack is asking for $10,000. Jill does some research, and she finds that Jack’s price is fair. However, before buying the car, Jill discovers that her friend John is also selling a 1979 AMC Pacer in the exact same condition for $9,000. Which car should Jill buy?
This isn’t a trick question; obviously, Jill should buy the $9,000 car from John rather than the $10,000 car from Jack. If a better deal exists in the world, you should walk away from your negotiation. You should only accept deals that more effectively meet your interests than your BATNA. In this case, Jill’s BATNA – buying John’s $9,000 car – was better than her negotiated deal with Jack.
While Jill found a better deal, she would increase the likelihood of finding the best deal if she took time to explore more alternatives and identify the best among them. If Jill’s main interests are having a car that is reliable and affordable, she could search for a different vehicle that offers better reliability at a lower price. Perhaps Jill could research whether she would save more money over the long term by investing in a new vehicle rather than a used car.
Just as we creatively explore options in negotiations, we should approach researching alternatives as an opportunity to think outside the box in order to meet our interests. Investing time and energy into identifying your best alternative provides you with a significant source of power in negotiation. The better your BATNA, the better your negotiated agreement needs to be.
Of course, not all negotiations provide such straightforward alternatives as Jill’s car buying negotiation. If Jill had to compare Jack’s $10,000 car to relying on public transportation, for instance, she must consider more than just price in her evaluation. How much does she value the independence owning her own vehicle will provide? Is it worth the extra investment? These are difficult questions to answer when buying a car, much less negotiating large business contracts, job offers, or legal settlements.
While you cannot always calculate clear comparisons, knowing your BATNA and evaluating how well it meets your interests compared to a negotiated agreement is a powerful move in negotiations. By identifying a BATNA in advance of your negotiation, you reap the following benefits:
You establish a baseline
Many people believe that negotiators need to establish a bottom line or walk-away point in order to avoid making “bad” deals. However, establishing a rigid bottom line limits you in a few ways. First, bottom lines can fail to take into account what’s realistic or possible to get right now. For instance, you may believe that your budding consulting services belong at the top of your industry. If you only have one potential client lined up for a meeting, though, you may not be able to demand the highest price your services are worth at this time. Bottom lines also limit your creative thinking power. With one number or a specific term in mind, you may leave value on the table and fail to negotiate a package with multiple beneficial terms. A classic example is negotiating hard on a specific salary point when you could negotiate additional vacation or flex time or professional development investments.
Evaluating negotiated deals against your BATNA, on the other hand, allows you to compare two concrete possibilities. It also allows you to focus your energy on negotiating an entire package before deciding whether it tops your BATNA, which can encourage creative option generation.
You protect yourself
Your negotiation counterpart may try to utilize difficult tactics: strategies meant to intimidate, provoke strong emotion, or push you into snap decision making. These tactics work best when negotiators are not prepared or caught off-guard, so knowing your BATNA protects you from attempts at intimidation. It provides you with an objective view of your circumstances – as well as the circumstances of the other side. If your counterpart is posturing and threatening to walk away, clearly explain the concrete actions you will take to implement your BATNA if the negotiation ends. Not only can this minimize the impact of such hard-nosed tactics, but you can also show your counterpart that you want to continue negotiating with them even though you have something to walk away to.
You have assurance
Without an established BATNA, you walk into your negotiations with a lot of uncertainty. Uncertainty pushes us to make uninformed, snap decisions based on our response to a stressful situation. Some negotiators may feel pressured into accepting deals out of fear that there will not be a better alternative. Other negotiators may walk away prematurely, scared to accept any deal because there might be some alternative out there that is better. A clearly established and well-researched BATNA lets you know exactly where you’ll go if you choose to walk away. Even a weak BATNA provides you with an understanding of where you stand and where you can go. Whether you choose to follow through with a negotiated agreement or walk away from the deal, the specter of “what if” won’t linger in the same way.
Now that you understand what a BATNA is and the benefits of knowing your BATNA in a negotiation, try the following negotiation strategies to utilize BATNA as a source of power:
Identify your BATNA – and then improve it
We know that a strong BATNA drives stronger negotiated outcomes, so improving your BATNA can help improve your negotiated agreements. Create a long list of possible alternatives, and identify two or three especially promising ones. Then, work to improve them. In Jill’s car negotiation from above, she could call local used car dealerships for comparable offers or to learn more about their financing and trade-in options. Concrete information is powerful when evaluating your BATNA, and the extra energy spent researching – and even negotiating beforehand – will pay off at the negotiation table.
Step away to evaluate
As you know, it can be difficult to compare your BATNA to a negotiated agreement as the terms become more varied and complex. Because of this, it’s important to give yourself space to compare any offer on the table to the value of your BATNA. Think beyond just the numbers. Which deal best meets all of your interests? Evaluating more subjective interests alongside cost and money gives you a better understanding of the full value of a negotiated outcome, but those comparisons are not always easily assessed. For instance, a plaintiff needs to evaluate how much she values the certainty and closure of a $30,000 negotiated settlement if her BATNA involves taking the case to court and possibly winning three times as much.
Use your BATNA as a shield and sword
If the other side talks extensively about better offers, you can present your BATNA as well to show that you are also comfortable walking away from the negotiation. However, you can reassert that despite your strong BATNA, you are at the negotiation table because you think the two of you can do better together. Likewise, you can present your BATNA if the other side is downplaying your ability to get a better deal. Telling the other side about a real offer, rather than threatening to walk and find something better, allows you to present your BATNA objectively (and powerfully) as a possibility.
Using timing to manage a weaker BATNA
Sometimes, even with diligent research and legwork, your BATNA is not very strong. While this weakens one source of power for you in the negotiation, you can try to buy yourself more time. Request a break to think about the agreement on the table, and see if you can improve upon your BATNA or explore other alternatives in the meantime.
Want to learn more about leveraging alternatives in your upcoming negotiations or how to improve your negotiation skills? Contact Chuck Doran at 617-895-4026 or firstname.lastname@example.org for more information.