Understanding BATNA in Negotiations
Let me explain what BATNA means to you as a negotiator. A strong BATNA gives you, the negotiating party, an attractive alternative if things don't work out.
What Is a BATNA?
The best alternative to a negotiated agreement, or BATNA, is the course of action you'll take if talks fail and no agreement is reached during negotiations. Negotiation researchers Roger Fisher and William Ury coined the term BATNA in their 1981 bestseller, Getting to Yes: Negotiating Agreement Without Giving In.
Key Takeaways
- The best alternative to a negotiated agreement (BATNA) exists when negotiations are not agreeable to the parties involved.
- A BATNA represents the most attractive option when negotiations fail.
- BATNAs determine the worst possible offer that a negotiator is willing to accept.
- Negotiators can improve their position by exploring multiple BATNAs.
Value of a BATNA
You can use a BATNA in any situation that involves negotiations, whether you're an employee seeking a raise or a company considering a merger. It provides you with alternatives and helps you avoid walking away from a bad deal by identifying it in advance.
If you're negotiating a price for a new car and the dealer's final offer is unacceptable, you could take the bad deal or walk away empty-handed. But if you have a BATNA, you can negotiate elsewhere for an alternative make or model. This gives you negotiating power, knowing you don't have to settle for a bad deal.
Fast Fact
The zone of possible agreement, or ZOPA, is the area of overlap among each party's BATNA.
BATNA Steps
In a negotiation, your BATNA is your determination of the action to take if no deal is reached. You should have a sense of the other party's BATNA too. If there's overlap, there's possibility for a satisfactory outcome for all.
If a deal's offer is lower than your reservation value—the lowest value you'd accept—you should reject it and pursue your BATNA. But if the final offer exceeds that value, you can agree to it. A strong BATNA gives you an appealing alternative, so you can walk away from a tempting but poor offer.
Harvard researchers outline these steps to clarify your BATNA: List all alternatives if the negotiation ends in an impasse. Evaluate them based on the value of pursuing each. Select the one or ones with the highest expected value. Then, calculate your reservation value, the lowest-valued deal you'd accept.
Strategies
Negotiation involves more than just alternatives; you need to understand the nuances of tactics to improve professional relationships and resolve disputes. There are pitfalls in difficult negotiations, and you must stay disciplined under pressure.
Understanding strategies helps you evaluate your strengths and weaknesses in conflict and manage your bargaining tendencies. Studying manipulative tactics can neutralize their effects. Prepare before negotiations by defining a strong BATNA and considering the other party's possible BATNAs. Expect them to do the same. You can prepare multiple BATNAs—the more you have, the more options at the table.
Advantages and Disadvantages
A strong BATNA is a valuable tool at the negotiating table, allowing you to ground positions on facts rather than emotions. It ensures a backup plan. However, the process has costs—finding the best alternative can be lengthy and expensive. It's not infallible; you risk miscalculating options or overlooking possibilities.
Pros
- Provides a backup plan if negotiations fail
- Grounds negotiations in a sound, factual basis
- Makes agreement more likely, as a strong BATNA is more likely to be acceptable to all parties
Cons
- Calculating BATNAs can be an expensive and complicated process.
- Negotiators may still miscalculate the cost or benefits of some alternatives.
- There is still a risk of making a disadvantageous choice.
Example
Company A makes a takeover offer of $20 million to Company B, whose executives believe it's worth $30 million. They reject it without accounting for increasing competition and tighter regulations that will lower its valuation.
If Company B had followed the BATNA steps, including evaluating staying the course in a tough environment, they might have accepted. They could have included those risks in their reservation value estimate.
What Is Sunk Cost Fallacy?
If you place too high a value on the other party's hand, you risk big concessions for little benefit. Undervaluing it makes you too inflexible. Many get emotionally invested, especially after time spent—this is the sunk cost fallacy. Always be ready to walk away.
Should Negotiators Reveal Their BATNA?
A strong BATNA provides leverage, but never reveal a weak one—it gives the other side reason to hold out for more. In employment negotiations, a strong counteroffer from another employer helps bargain for better terms. A weak one shows you have no advantage elsewhere.
What Is the Difference Between a BATNA and Reservation Value?
Your BATNA is the best option if negotiations fail, while reservation value is the worst deal you'd accept. Reservation value is always higher than the BATNA. For example, in buying a car, BATNA might be another dealer; reservation value is the highest price you'd pay.
The Bottom Line
Deciding on a BATNA is key in planning any negotiation. Negotiations can fail, and if they do, your BATNA provides an alternative.
