Establishing your BATNA – Best Alternative to Negotiated Agreement
What would happen if you desperately need to sealing a deal in an upcoming negotiation, you have no alternative and the other party if well aware of your need? In all likelihood you will be offered a sub-optimal deal that you must either accept or walk away from. So, how can you protect yourself from accepting an unfavorable deal and then place yourself in a better position to achieve a more valuable outcome?
The answer to both questions’ rests with the development of your BATNA – Best Alternative to a Negotiated Agreement. A BATNA provides the benchmark against which you should measure if an agreement is more acceptable to you then what you can achieve elsewhere. Simply put, if your BATNA is better than what you are likely to achieve through negotiation, than perhaps you should not participate in the Negotiation (Susskind and Cruickshank: 1987). Yet, all too often many negotiators still enter into with only an aspiration price or point (AP) and no BATNA to guide them. They are often consumed by what they may stand to gain from negotiation, lose focus of and are totally unprepared for what they may stand to lose without a BATNA. In doing so they risk accepting a sub-optimal agreement or having to walk away from the deal completely.
The BATNA goes beyond your bottom line of what may be acceptable – it provides an alternative on which to measure if the proposed or potential terms or solutions offered in negotiation will serve your interests better than what you can achieve elsewhere. Your bottom line is the resistance point below or beyond which it makes no sense at all to accept the deal offered. Your BATNA should be above your bottom line, and the more you can develop your BATNA during the preparation process, the more you move the potential gains above your bottom line. During the preparation phase, you should be looking to identify, develop and accurately calculate your potential BATNA. The more you develop your BATNA, the stronger your bargaining power becomes.
Similarly, during the preparation phase, you should attempt to identify or calculate the other side’s BATNA, for this will provide you with the upper limit (guide) to how far you may push your proposals – this is particularly important when you are placing your opening bid so that you may position your proposal as close to the other side’s BATNA as possible without exceeding their BATNA. In the absence of knowing their BATNA, you run the risk of anchoring your first proposal to low (below what they are willing to offer), having it accepted (or negotiated down further) and leaving considerable value behind on the table. This is known as the ‘winners curse’. Alternatively, you may set your Aspiration Price or point to high, bidding above their BATNA and running the risk that the other party may become offended by, or will not taking the offer seriously, and subsequently walking away from the negotiation.
In summary, your BATNA sets the lowest limit and their BATNA sets the upper limit within which the bargaining range is framed. This bargaining range is known as the ZOPA – Zone of Possible Agreement, a concept we will later discuss in this series. Suffice to say, that by strengthening your BATNA and weakening the other side’s BATNA you move the bargaining range further in your favor and away from your reservation point. This is the power of having and knowing BATNAs.
When a party has a strong BATNA they become less dependent upon negotiating an outcome with the other party -they are more likely to set higher objectives or reservation point and take a tougher, more confident approach to achieve those objectives. In contrast, where a party has a weak or non-existent BATNA they become more dependent upon accepting a sub-optimum but satisfactory deal or rejecting the deal altogether (Lewicki et al: 1997).
We will expand further on the importance of the BATNA in following posts as we examine reservation and aspiration points, ZOPA and opening bids or proposals.
Follow the SPANS blog series for more diverse insights into the field of Negotiation. A SPANS Webinar activity will be offered as a follow up to selective topics/posts.
If you would like to have Peter Spence as a speaker, advisor/coach or trainer at your company, group or organisation please contact Peter via the website contact form or by email at pmspence@bigpond.com and learn to become a better negotiator.