What is a BATNA?
BATNA stands for Best Alternative to a Negotiated Agreement – what you will walk away with if negotiation fails or the parties cannot agree. Let’s explain this with an example. Jill needs a car, so she’s negotiating with Jack to buy his. Jack is asking for EUR 10,000. Jill does some research, and she finds that Jack’s price is fair. However, before buying the car, Jill discovers that her friend John is selling the same car in the exact same condition for EUR 9,000. Which car should Jill buy? This isn’t a trick question; obviously, Jill should buy the EUR 9,000 car from John rather than the EUR 10,000 car from Jack. You should only accept deals that more effectively meet your interests than your BATNA. In this case, Jill’s BATNA – buying John’s EUR 9,000 car – was better than her negotiated deal with Jack. While Jill found a better deal, she would increase the likelihood of finding the best deal if she took time to explore more alternatives and identify the best among them. If Jill’s main interests are having a car that is reliable and affordable, she could search for a different vehicle that offers better reliability at a lower price. Perhaps Jill could research whether she would save more money over the long term by investing in a new vehicle rather than a used car. Just as we creatively explore options in negotiations, we should approach researching alternatives as an opportunity to think outside the box in order to meet our interests.
What are the benefits of having and using a BATNA?
Investing time and energy into identifying your best alternative provides you with a significant source of power in negotiation. The better your BATNA, the better your negotiated agreement needs to be. Of course, not all negotiations provide such straightforward alternatives as Jill’s car buying negotiation. If Jill had to compare Jack’s EUR 10,000 car to relying on public transportation, for instance, she must consider more than just price in her evaluation. How much does she value the independence owning her own vehicle will provide? Is it worth the extra investment? These are difficult questions to answer when buying a car, much less negotiating large business contracts, job offers, or legal settlements. While you cannot always calculate clear comparisons, knowing your BATNA and evaluating how well it meets your interests compared to a negotiated agreement is a powerful move in negotiations.
- You establish a baseline rather than a rigid bottom line. With one number or a specific term in mind, you may leave value on the table and fail to negotiate a package with multiple beneficial terms. A classic example is negotiating hard on a specific salary point when you could negotiate additional vacation or flex time or professional development investments.
- Evaluating negotiated deals against your BATNA, allows you to compare two concrete possibilities. It also allows you to focus your energy on negotiating an entire package before deciding whether it tops your BATNA, which can encourage creative option generation.
- You protect yourself. Your negotiation counterpart may try to utilize difficult tactics and catch you off-guard, so knowing your BATNA protects you from attempts at intimidation. Clearly explaining the concrete actions you will take to implement your BATNA if the negotiation ends can minimize the impact of hard-nosed tactics, and you can also show your counterpart that you want to continue negotiating with them even though you have something to walk away to.
- You have assurance. Without an established BATNA, you walk into your negotiations with a lot of uncertainty. Uncertainty pushes us to make uninformed, snap decisions based on our response to a stressful situation.
If you can work out what you think the other side’s BATNA is, then it will give you clues about how to adapt any offers you are making.
What else can I do with my BATNA?
Improve it! A strong BATNA drives stronger negotiated outcomes, so improving your BATNA can help improve your negotiated agreements. Create a list of possible alternatives, and identify two or three especially promising ones. Then, work to improve them. In Jill’s car negotiation from above, she could call local used car dealerships for comparable offers or to learn more about their financing and trade-in options. Concrete information is powerful when evaluating your BATNA, and the extra energy spent researching – and even negotiating beforehand – will pay off.
Step away to evaluate! It can be difficult to compare your BATNA to a negotiated agreement as the terms become more varied and complex. Because of this, it’s important to give yourself space to compare any offer on the table to the value of your BATNA. Think beyond just the numbers. Which deal best meets all of your interests? Evaluating more subjective interests alongside cost and money gives you a better understanding of the full value of a negotiated outcome, but those comparisons are not always easily assessed. For instance, in a court case for damages, a plaintiff needs to evaluate how much she values the certainty and closure of a EUR 30,000 negotiated settlement if her BATNA involves taking the case to court and possibly winning three times as much.
Use your BATNA strategically! If the other side talks extensively about better offers, you can present your BATNA as well to show that you are also comfortable walking away from the negotiation. However, you can reassert that despite your strong BATNA, you are at the negotiation table because you think the two of you can do better together. Likewise, you can present your BATNA if the other side is downplaying your ability to get a better deal. Telling the other side about a real offer, rather than threatening to walk and find something better, allows you to present your BATNA objectively (and powerfully) as a possibility.
Using timing to manage a weaker BATNA! Sometimes, even with diligent research, your BATNA is not very strong. While this weakens one source of power for you in the negotiation, you can try to buy yourself more time. Request a break to think about the agreement on the table, and see if you can improve upon your BATNA or explore other alternatives in the meantime.
ZOPA and HIT explained in our next newsletter!