What if you can not reach a conclusion in a negotiation? Do you have the best alternative such that you don’t need to give in. Yes, that’s what BATNA is. BATNA is an acronym that stands for Best Alternative To a Negotiated Agreement. It is defined as the most advantageous alternative that a negotiating party can take if negotiations fail and an agreement cannot be made.
What Is BATNA : Best Alternative to a Negotiated Agreement?
According to Investopedia
The best alternative to a negotiated agreement BATNA) is the course of action that a party engaged in negotiations will take if talks fail, and no agreement can be reached. Negotiation researchers Roger Fisher and William Ury coined the term BATNA in their 1981 bestseller “Getting to Yes: Negotiating Agreement Without Giving In.” A party’s BATNA refers to what a party can fall back on if a negotiation proves unsuccessful.
According to HBR
The definition, or the ability to identify a negotiator’s best alternative to a negotiated agreement, is among one of the many pieces of information negotiators seek when formulating dealmaking and negotiation strategies. If your current negotiation reaches an impasse, what’s your best outside option? That’s BATNA.
According to Beyondintractability
It is the best you can do if the other person refuses to negotiate with you–if they tell you to “go jump in a lake!” or “Get lost!” So it is not necessarily your ideal outcome–unless your ideal outcome is something you can get without the cooperation of the other person. It is the best you can do WITHOUT THEM.
According to Negotiationmaker
BATNA is an acronym popularised by Roger Fisher and William Ury which stands for ‘Best Alternative to a Negotiated Agreement’. BATNA answers the question: ‘What would you do if you weren’t able to agree a deal with your negotiation counterparty?’ Your BATNA is the alternative action you’ll take should your proposed agreement fail to materialize. Most business people simply use the phrase: ‘Best Alternative’.
What is the importance of BATNA?
BATNA is often used in negotiation tactics and should always be considered before a negotiation takes place. It is never wise to enter into a serious negotiation without knowing your BATNA. The value of knowing your best alternative to a negotiated agreement is that:
- It provides an alternative if negotiations fall through.
- It provides negotiating power.
- It determines your reservation point (the worst price you are willing to accept).
For example, Company A makes a takeover offer of $20 million to Company B. Yet Company B believes they are worth $30 million in valuation. Company B quickly rejects the offer. However, what Company B did not take into account is the increasing competition in the industry and tighter regulations—all of which will restrict its growth in the coming year(s) and lower its valuation. If Company B had taken time to incorporate these factors into the current valuation, and clearly moved through the four BATNA steps, including #2, evaluating the alternative of staying the course in a difficult business environment, management might have been persuaded to accept.
A strong BATNA can also help a party understand that it has an appealing alternative to the deal and can walk away from a tempting offer.
How to liverage your BATNA?
Your Best Alternative To a Negotiated Agreement is a well conceived plan that you are willing and able to execute if no agreement can be reached. In the initial stage, you need to test your assumptions and learn more about your counterpart’s contingency plans.
- The more you know, the more accurate assessment you can make about the relative strength of your BATNA compared to your counterpart’s BATNA.
- In Exchange, you will also hint at your BATNAs if they are indeed strong. You want the other side to perceive you have the power to walk away from this agreement if necessary (assuming you do; bluffs are always risky).
- If you determine you don’t trust the other side, or find they have been deceitful, this is a good time to got to Best Alternative to a Negotiated Agreement
- The BATNA is a unilateral option that does not depend on the consent of the other party.
- The more BATNAs you have and the more willing and ready you are to execute one, the less likely you will need a BATNA.
- Consider short-term and long-term BATNAs. Sometimes you don’t have a BATNA and must reach agreement. Be sure to continue working on a long-term BATNA for future use.
- Having well thought-out BATNAs that you are willing to execute provides you with a tremendous amount of power during negotiations.
- You want to find a graceful way to ensure the other side knows you have BATNAs and will execute.
- Start to let the other side know you have Best Alternative to a Negotiated Agreements during the Exchange stage, although not necessarily what they are. In Bargaining, you will decide if and when to reveal your BATNAs.
- If you are having trouble learning and assessing your counterpart’s Best Alternative to a Negotiated Agreement, this may indicate you need to build more trust before probing further.
- BATNAs can be used as an advisory or a threat. Threats damage relationships; advisories strengthen them.
- Misreading the strength of your counterpart’s BATNA can result in impasse after extensive time has already been invested in bargaining.
- Ideal time to execute BATNAs: If you have fairly assessed the parties’ BATNAs, yours and theirs, you might choose to execute your BATNA before entering the Bargaining stage. You certainly don’t want to spend time in Bargaining only to get to the Conclude stage and have to execute your strategy
- Misreading the strength of your counterpart’s Best Alternative to a Negotiated Agreement can result in ipasse after extensive time has already been invested in bargaining.
- If you have all the power in a negotiation, it is wise not to talk about your BATNA. When parties with power flaunt their BATNA, the less powerful counterpart builds an offensive. (i.e., your competitors all need this product and we have limited capacity; we can get this from any number of suppliers; there are 7 others who want this same location, etc.)
- Renegotiations discussions almost always involve a battle of BATNAs.
- A BATNA that you aren’t willing and able to execute is a Bluff.
- Start researching early, as it usually takes more time than most expect to develop their BATNA to the stage where it becomes actionable.
- Don’t focus exclusively on your BATNA. Most don’t give enough thought or research into uncovering their counterparty’s BATNA.
- Focus on facts not posturing and biases. Most overestimate their batna and often grossly over or underestimate the other side