Selling & Negotiation Skills_6

BATNA

In negotiation theory, the best alternative to a negotiated agreement or BATNA is the course of action that will be taken by a party if the current negotiations fail and an agreement cannot be reached.
If the current negotiations are giving you less value than your BATNA, there is no point in proceeding. Prior to the start of negotiations, the parties should have ascertained their own individual BATNAs.
BATNA was developed by negotiation researchers Roger Fisher and Bill Ury of the Harvard Program on Negotiation (PON), in their series of books on Principled Negotiation that started with Getting to YES. Nobel Laureate John Forbes Nash has included such ideas in his early undergraduate research.
For example, if I have a written offer from a dealer to buy my car for $100 dollars, then my BATNA when dealing with other potential purchasers would be $100 since I can get $100 for my car even without reaching an agreement with such alternative purchaser.
A party should generally never accept a worse resolution than its BATNA. Care should be taken, however, to ensure that deals are accurately valued, taking into account all considerations (such as relationship value, time value of money, likelihood that the other party will live up to their side of the bargain, etc.) These other considerations are very difficult to value, since they are often based on uncertain considerations, rather than easily measurable and quantifiable factors.
Examples of other offers that might or might not be better than the BATNA in the example above might be:
An offer of $90 by a close relative (is the goodwill generated worth $10 or more?)
An offer of $125 in 45 days (what are the chances of this future commitment falling through, and would my prior BATNA ($100) still be available if it did?)
An offer from another dealer to offset $150 against the price of a new car (do I want to buy a new car right now, the offered car in particular? Also, is the probably minuscule reduction in monthly payments worth $100 to me today?)
BATNA is seen in negotiation fields as the single most important source of negotiation power. Negotiators don't use their BATNA merely as a safety net, but rather as a point of leverage in negotiations.
Consider the following business example: Company one can choose to buy from companies two, three and four - but companies two, three and four can only sell to company one. Company one can use their powerful BATNA position to leverage a better deal by playing companies two, three and four against each other. This is a common practice among purchasing and procurement managers in the business world.
Whilst your alternative options, and therefore your BATNA might be known to you, very often your BATNA may not be. So time and energy are demanded to figure out which options are really available to you and actionable. Even if your alternative options are known, they need to be real and actionable. A Project on Negotiation Executive Seminar experiment and other experiments have proven that most managers overestimate their BATNA whilst simultaneously investing too little time into researching their real options. This results in poor or faulty decision making from overconfidence and good choices being rejected
What BATNAs Are
BATNA is a term coined by Roger Fisher and William Ury in their 1981 bestseller, Getting to Yes: Negotiating Without Giving In.[1] It stands for "best alternative to a negotiated agreement." BATNAs are critical to negotiation because you cannot make a wise decision about whether to accept a negotiated agreement unless you know what your alternatives are. Your BATNA "is the only standard which can protect you both from accepting terms that are too unfavorable and from rejecting terms it would be in your interest to accept."[2] In the simplest terms, if the proposed agreement is better than your BATNA, then you should accept it. If the agreement is not better than your BATNA, then you should reopen negotiations. If you cannot improve the agreement, then you should at least consider withdrawing from the negotiations and pursuing your alternative (though the costs of doing that must be considered as well).
Having a good BATNA increases your negotiating power. Therefore, it is important to improve your BATNA whenever possible. Good negotiators know when their opponent is desperate for an agreement. When that occurs, they will demand much more, knowing their opponent will have to give in. If the opponent apparently has many options outside of negotiation, however, they are likely to get many more concessions, in an effort to keep them at the negotiating table. Thus making your BATNA as strong as possible before negotiating, and then making that BATNA known to your opponent will strengthen your negotiating position.
"The reason you negotiate is to produce something better than the results you can obtain without negotiating. What are those results? What is that alternative? What is your BATNA -- your Best Alternative To a Negotiated Agreement? That is the standard against which any proposed agreement should be measured." -- Roger Fisher and William Ury
Guy Burgess and Heidi Burgess have adapted the concept of BATNA slightly to emphasize what they call "EATNAs" estimated alternatives to a negotiated agreement" instead of "best alternatives." Even when disputants do not have good options outside of negotiations, they often think they do. (For example, both sides may think that they can prevail in a military struggle, even when one side is clearly weaker, or when the relative strengths are so balanced that the outcome is very uncertain.) Yet, perceptions are all that matter when it comes to deciding whether or not to accept an agreement. If a disputant thinks that he or she has a better option, she will, very often, pursue that option, even if it is not as good as she thinks it is.
BATNA and EATNAs also affect what William Zartman and may others have called "ripeness," the time at which a dispute is ready or "ripe" for settlement.[3] When parties have similar ideas or "congruent images" about what BATNAs exist, then the negotiation is ripe for reaching agreement. Having congruent BATNA images means that both parties have similar views of how a dispute will turn out if they do not agree, but rather pursue their other rights-based or power-based options. In this situation, it is often smarter for them to negotiate an agreement without continuing the disputing process, thus saving the transaction costs. This is what happens when disputing parties who are involved in a lawsuit settle out of court, (which happens in the U.S. about 90 percent of the time). The reason the parties settle is that their lawyers have come to an understanding of the strength of each sides' case and how likely each is to prevail in court. They then can "cut to the chase," and get to the same result much more easily and more quickly through negotiation.
On the other hand, disputants may hold "dissimilar images" about what BATNAs exist, which can lead to a stalemate or even to intractability. For example, both sides may think they can win a dispute if they decide to pursue it in court or through force. If both sides' BATNAs tell them they can pursue the conflict and win, the likely result is a power contest. If one side's BATNA is indeed much better than the other's, the side with the better BATNA is likely to prevail. If the BATNAs are about equal, however, the parties may reach a stalemate. If the conflict is costly enough, eventually the parties may come to realize that their BATNAs were not as good as they thought they were. Then the dispute will again be "ripe" for negotiation.
The allure of the EATNA often leads to last-minute breakdowns in negotiations. Disputants can negotiate for months or even years, finally developing an agreement that they think is acceptable to all. But then at the end, all the parties must take a hard look at the final outcome and decide, "is this better than all of my alternatives?" Only if all the parties say "yes," can the agreement be finalized. If just one party changes his or her mind, the agreement may well break down. Thus, knowing one's own and one's opponent's BATNAs and EATNAs is critical to successful negotiation
Additional insights into BATNA are offered by Beyond Intractability project participants.
Determining Your BATNA
BATNAs are not always readily apparent. Fisher and Ury outline a simple process for determining your BATNA:
1. develop a list of actions you might conceivably take if no agreement is reached;
2. improve some of the more promising ideas and convert them into practical options; and
3. select, tentatively, the one option that seems best.[4]
BATNAs may be determined for any negotiation situation, whether it be a relatively simple task such as finding a job or a complex problem such as a heated environmental conflict or a protracted ethnic conflict.
Fisher and Ury offer a job search as a basic example of how to determine a BATNA. If you do not receive an attractive job offer by the end of the month from Company X, what will you do? Inventing options is the first step to determining your BATNA. Should you take a different job? Look in another city? Go back to school? If the offer you are waiting for is in New York, but you had also considered Denver, then try to turn that other interest into a job offer there, too. With a job offer on the table in Denver, you will be better equipped to assess the New York offer when it is made. Lastly, you must choose your best alternative option in case you do not reach an agreement with the New York company. Which of your realistic options would you really want to pursue if you do not get the job offer in New York?
More complex situations require the consideration of a broader range of factors and possibilities. For example, a community discovers that its water is being polluted by the discharges of a nearby factory. Community leaders first attempt to negotiate a cleanup plan with the company, but the business refuses to voluntarily agree on a plan of action that the community is satisfied with. In such a case, what are the community's options for trying to resolve this situation?
They could possibly sue the business based on stipulations of the Clean Water Act.
They could contact the Environmental Protection Agency and see what sort of authority that agency has over such a situation.
They could lobby the state legislature to develop and implement more stringent regulations on polluting factories.
The community could wage a public education campaign and inform citizens of the problem. Such education could lead voters to support more environmentally minded candidates in the future who would support new laws to correct problems like this one.
In weighing these various alternatives to see which is "best," the community members must consider a variety of factors.
Which is most affordable and feasible?
Which will have the most impact in the shortest amount of time?
If they succeed in closing down the plant, how many people will lose their jobs?
These types of questions must be answered for each alternative before a BATNA can be determined in a complex environmental dispute such as this one.
BATNAs and the Other Side
At the same time you are determining your BATNA, you should also consider the alternatives available to the other side. Sometimes they may be overly optimistic about what their options are. The more you can learn about their options, the better prepared you will be for negotiation. You will be able to develop a more realistic view of what the outcomes may be and what offers are reasonable.
There are also a few things to keep in mind about revealing your BATNA to your adversary. Although Fisher and Ury do not advise secrecy in their discussions of BATNAs, according to McCarthy, "one should not reveal one's BATNA unless it is better than the other side thinks it is."[5] But since you may not know what the other side thinks, you could reveal more than you should. If your BATNA turns out to be worse than the opponent thinks it is, then revealing it will weaken your stance.
BATNAs and the Role of Third Parties
Third parties can help disputants accurately assess their BATNAs through reality testing and costing. In reality testing, the third party helps clarify and ground each disputing party's alternatives to agreement. S/he may do this by asking hard questions about the asserted BATNA: "How could you do that? What would the outcome be? What would the other side do? How do you know?" Or the third party may simply insert new information into the discussion...illustrating that one side's assessment of its BATNA is likely incorrect. Costing is a more general approach to the same process...it is a systematic effort to determine the costs and benefits of all options. In so doing, parties will come to understand all their alternatives. If this is done together and the parties agree on the assessment, this provides a strong basis upon which to come up with a negotiated solution that is better than both sides' alternatives. But if the sides cannot come to such an agreement, then negotiations will break down, and both parties will pursue their BATNA instead of negotiation.
Importance of batna
BATNA is the acronym for Best Alternative To a Negotiated Agreement. If you look at it from the simplest standpoint, your BATNA is the choice you can make if you conclude that negotiating with a particular party is not likely to yield a favorable result. You can walk away from a negotiation if your BATNA is better than the likely outcome of that negotiation.
BATNA, however, covers far more than that. One view says that BATNA is the measure of the balance of power in a negotiation. If other parties need you in order to reach their objectives, your BATNA is strong; your negotiating circumstances are strong. If you want to buy a new car and the same model is for sale at several car dealers, you have a strong BATNA because you can benefit from their competition for your business.
It is crucial to think of BATNA as having two stages in a negotiation. You start off with your 'walking-in' BATNA; the things you can influence or control before the negotiation begins. However, once negotiation starts, the BATNA is a dynamic element, changing as you derive information about the interests of other parties and their constituencies and as you compare the resources each party (including you) has available to bring about and fulfill an agreement.
You can think of BATNA in negotiation like playing a game of cards. Your walking-in BATNA may be the first cards you are dealt. In many card games, your hand may change during the play as new cards are dealt to you (and others). So your BATNA changes as new cards come into your hand. If those new cards are only known to you, you develop a greater understanding of your own apparent strength. If the new cards are dealt to all the players in a way that allows each player to see at least some of the cards in each player's hand, you learn more about the comparative strength of your BATNA. In negotiation, rather than looking at cards, we are assessing information about our own resources, those of other negotiating parties, and the influences on each negotiator from their constituencies.
By looking at BATNA as an ongoing, changing measure of negotiating strength, as a mechanism for deciding whether and/or when to quit, we develop a disciplined, informed approach to our negotiations.