BATNA: Your Secret Weapon in Negotiations

The Professional Air Traffic Controllers Organization union declared a strike on August 3, 1981. President Ronald Reagan deemed this to be “a peril to national safety” and ordered air traffic controllers back to work within 48 hours under the terms of the Taft-Hartley Act. Two days later, President Reagan fired more than 11,000 air traffic controllers who had ignored the court order to return to work and banned them from federal service for life.1

The union negotiators had made a critical mistake in their strike and negotiations — they failed to assess the costs of the other party’s best alternative to a negotiated agreement (BATNA) options. As a result, their membership lost everything.

The BATNA is the most favorable course of action a party can follow in the event of a failed agreement from negotiation, according to the book Getting to Yes: Negotiating Agreement Without Giving In.2 If discussions fail with the other party, then your BATNA is “Plan B.” In the case of President Reagan, he selected his BATNA option after revealing it to the controller union negotiators rather than agreeing to an unacceptable scenario.

As the most potent alternative to a negotiated agreement, BATNA allows either side to withdraw from the primary negotiations and proceed with an alternative option. This option may initially be equal to or even less desirable than the primary acceptable scenarios.

Still, at some point in negotiations, it may represent a more relatively attractive option. Before starting a negotiation, a best practice is to invest time in working out your team’s BATNA and attempting to identify the opposing party’s BATNA options.

Creating & Knowing Your BATNA

Harvard Law School created the following technique for determining a company’s BATNA:3

  1. List all alternatives to the current negotiation. What could you do if negotiations fall through?
  2. Evaluate the value of each alternative. How much is each worth to you?
  3. Select the alternative that would provide the highest value to you. This is your BATNA.
  4. After determining your BATNA, calculate the lowest-valued deal in which you are willing to accept in the current negotiation.

When it comes to negotiations, identifying your BATNA is critical. Having a BATNA before negotiating begins means you will be able to exert higher demands on the other party since you have a viable Plan B. While this does not always mean you will get everything you want, it prevents you from accepting an alternative that is less desirable than your preferred outcome.

Diversification is a good strategy for negotiators in all fields because it implies numerous viable alternatives rather than just one. Consequently, if the discussions favor the other party, then it will be easier to walk away. So, if your present negotiation comes to a stalemate, you already know your best outside option. A best practice is to pursue a few different offers to maximize your chances of success.

Even if you provide best- and worst-case scenarios, it is beneficial to give a third scenario, such as a “most probable” option, that falls somewhere between the two extremes. Extreme win/loss metrics might be challenging to navigate in negotiations, especially if they represent a broad range, so having the most probable option can help lessen the management of many options.

However, when a situation is “all or nothing,” a middle-of-the-road scenario is not applicable, and there is only one option. An example of this single option would occur if a company was renegotiating a supplier agreement with a sole source provider with no other options available.

Also, instead of thinking of your BATNA as an outside possibility that has no relation to the other party, consider the ramifications of saying “no” to the other side’s proposal. For the most part, how will these consequences affect your interests in a way that is good for your company while bad for the other party? Consequences may include costs or risks that each party must bear, missed opportunities, altered settlement prospects, harm to the relationship, etc. Even though these are not outside options that are independent of the other party, they are still important.

When your party is at a disadvantage, consider how your side’s financial situation might improve with the benefit of additional cash flow or other factors if a completed agreement was delayed. With this, your BATNA may be to continue negotiations with the same counterpart while continuing to say no until your company’s standing has improved relative to the other party’s, rather than considering external choices that are independent of the other party.

Without a well-defined BATNA, you will be entering talks with a great deal of ambiguity. When facing uncertainty, hasty, misinformed judgments are more likely to be made. Some negotiators may be compelled to accept bargains because they believe there is no other option.

In contrast, others may leave negotiations prematurely, afraid to take any agreement since there may be a better alternative. Either way, the fear of what could have been will not linger as much if you decide to go through with the negotiated agreement.

If you choose to walk away, then your well-defined BATNA lets you know exactly where you will be going. Not only do BATNAs let you see where you are, but also where you want to go.

Check All Egos at the Door

Ego can be a common negotiator bias since most people exhibit a self-serving bias in their views and expectations. When given the same information, each person will interpret it differently based on their perspective. First, each will choose a favorable interpretation or result for themselves; then, they will defend that choice on the premise of fairness. To see oneself in the best possible light, people often change the prominence of the attributes that influence their fair assessment. Some are downplayed, while others are heightened.

Ego causes us to draw erroneous assumptions about the ethical behavior of the other negotiating party. Being unaware of an ego bias can inadvertently lead one party to become suspicious and distrust the other party. Most people generally assume that their opponent is trying to get the better of them during negotiation. When a request is made that is deemed outside the acceptable range, recognize the urge to immediately distrust the other party. The best solution is to treat the situation as if you were assessing it as an outside third party.

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