Chapter 4
Negotiating techniques: BATNA
BATNA stands for ‘best alternative to a negotiated agreement’. Whenever you negotiate with another party, there is a chance that the negotiation may break down and that you will have to fall back on some alternative course of action. Your BATNA is this alternative course of action. Being clear on what it is, and what is the other party’s BATNA, is crucial to effective negotiation.
When to use it
- To get a better deal for yourself whenever you negotiate anything – for example, a pay rise or buying a house.
- To help your firm handle complex negotiations – for example, acquiring another firm or resolving a dispute with a labour union.
Origins
People have been negotiating with one another since civilisation began, and over the years a lot of academic research has been done to establish the factors that contribute to a successful negotiated outcome in a business setting. The term ‘BATNA’ was coined by researchers Roger Fisher and William Ury in their 1981 book Getting to Yes: Negotiating Agreement Without Giving In. While the notion of understanding your fall-back position in a negotiation was in existence before, the BATNA label proved very powerful as a way of focusing attention on the key elements of a negotiation. It is now a very widely used term.
What it is
To negotiate effectively, you need to understand your BATNA. This is your ‘walk-away’ option – the course of action you will take if the negotiation breaks down and you cannot agree with the other party. Sometimes it is really clear what the BATNA is; however, it is not necessarily obvious. Let’s say you have developed a new consumer product, but you are struggling to agree a reasonable price with a major supermarket chain. Is your best alternative here to sell it through a smaller chain of supermarkets, to sell it online or to drop the product launch altogether? There are many other factors at play here, and these include non-quantifiable things such as your personal reputation.
How to use it
According to Fisher and Ury, there is a simple process for determining your BATNA that can be applied to any negotiation:
- Develop a list of actions you might conceivably take if no agreement is reached.
- Improve some of the more promising ideas and convert them into practical options.
- Select, provisionally, the one option that seems best.
Note that a BATNA is not the same thing as a ‘bottom line’ that negotiators will sometimes have in mind as a way of guarding themselves against reaching agreements where they give too much. A bottom line is meant to act as a final barrier, but it also runs the risk of pushing you towards a particular course of action. By using the concept of a BATNA, in contrast, you think less about the objectives of a specific negotiation and instead you focus on the broader options you have to achieve your desired objectives. This provides you with greater flexibility, and allows far more room for innovation than a predetermined bottom line.
Negotiation dynamics
If you are clear what your own BATNA is, you know when to walk away from a negotiation. It is also important to think about the BATNA of the other party. For example, if you are trying to negotiate terms for a new job with an employer and you know there are other good people short-listed for that job, then the employer’s BATNA is simply to hire the next person on the list.
The catch here is that you often do not know what the other party’s BATNA really is – and indeed it is often in their interests to keep this as hidden as possible. One useful variant of BATNA is the notion of an EATNA – an ‘estimated alternative to a negotiated agreement’ – which applies in the (frequent) cases where one or both parties are not entirely clear what their best alternative looks like. For example, in any courtroom battle both sides are likely to believe they can prevail, otherwise they wouldn’t be there.
Should you reveal your BATNA to the other party? If it is strong, there are benefits to disclosing it as it forces the other party to confront the reality of the negotiation. If your BATNA is weak, it is generally best not to disclose it – sometimes it is possible to ‘bluff’ your way to a better outcome than you would otherwise achieve.
Top practical tip
The key idea of thinking through your BATNA is that it doesn’t lock you into one course of action. People often enter a negotiation with predetermined positions (such as a particular price) underpinned by certain interests (fears, hopes, expectations), and this often means that the negotiation breaks down, with both sides losing out.
Your challenge as a negotiator is to look beyond the positions initially communicated and to uncover and explore the interests that gave rise to these positions. This often involves some creativity, and some openness on both sides to broaden the dimensions on which they believe they are negotiating.
Top pitfalls
While it is useful to think through the dynamics of a negotiation, and to try to anticipate the other party’s BATNA, the biggest pitfall is not knowing your own BATNA. For example, in a corporate situation you will often find yourself exposed to internal pressure from colleagues to make an agreement happen, which may mean committing to terms that are unfavourable. By being explicit on your BATNA in advance, and communicating this to colleagues, you can avoid finding yourself in an awkward position.
A related pitfall is to be overconfident that you know the BATNA of the other party. If an employee comes to you asking for a raise because he has an offer from a competing firm, do you really know how serious he is about taking that offer? Obviously you will have some intuitive sense of his preferences, and this will guide your negotiation, but if you tell yourself he is not serious about leaving, you run the risk of low-balling your offer to him and losing a good person.
Further reading
Burgess, H. and Burgess, G. (1997) The Encyclopaedia of Conflict Resolution. Santa Barbara, CA: ABC-CLIO.
Fisher, R. and Ury, W. (1981) Getting to Yes: Negotiating agreement without giving in. London: Random House.