Negotiationby Bob MacKenzie
Deciding whether or not to negotiate
Before entering in negotiations, we need to ask why we are doing so and whether there might be a better alternative to negotiation.
Why do you negotiate?
The reason you negotiate is to produce something better than the results you can obtain without negotiating.
In other words, we negotiate when it’s better than the alternative of not negotiating. So before we decide whether or not we need to enter into negotiations, we must first consider what the options might be. We need to eliminate the possibility that there’s a better way of doing things than negotiation, and we also need to be clear whether or not the time, place and issue are conducive to a negotiated agreement.
And we do this by considering our BATNA.
A BATNA is a Best Alternative to a Negotiated Agreement.
What are those results [that you can obtain without negotiating]? What is the alternative [to negotiation]? What is your BATNA – your Best Alternative To a Negotiated Agreement? This is the standard against which any proposed agreement should be measured.
BATNAs are a measure of the balance of power in a negotiation. If it’s clear that the other party needs you in order to reach their objectives, your BATNA is likely to be relatively strong and so, therefore, is your negotiating position.
When your BATNA is stronger...
You want to hire a new member of staff and you’ve attracted several eager candidates of more or less equal acceptability to you. You can benefit from this competition and your BATNA is probably stronger than any one of theirs.
When the other party’s BATNA is stronger...
Conversely, suppose you’ve identified the ideal candidate. You desperately want this person, but your preferred candidate has already received several other attractive job offers. In this case, the candidate’s BATNA is probably stronger than yours.
Keep your BATNA under constant review
BATNAs are in a constant state of flux. It might help to think of two different types of BATNA – your ‘initial BATNA’ and your ‘emergent BATNA’:
- Your initial BATNA is pre-determined – it’s one that you’ve identified before negotiations begin in earnest
Your emergent BATNA is that which changes or becomes clearer during the negotiations as you begin to obtain more information about your own and the other party’s
In other words, the relative strengths of the respective hands you are dealing with are likely to change in the course of the negotiations, so you should be alert to this probability. Reappraise your own BATNA, and keep putting yourself in the other party’s shoes and reappraise their BATNA.
You also need to beware of over-estimating the strength or accuracy of your BATNA in case you miscalculate the strength of your case for entering into negotiations. This is why it also helps to think in terms of EATNAs and WATNAs.
Your EATNA is your Estimated Alternative To a Negotiated Agreement. The term EATNA was coined by Guy and Heidi Burgess as an adaptation of BATNA. It arises from the proposition that sometimes our imagined options to negotiation are not as strong as we might initially think. So we need to run a reality check on our imagined options to a negotiated agreement before deciding whether or not to pursue them.
Your WATNA is your Worst Alternative To a Negotiated Agreement. It addresses the question ‘What’s the worst thing that could happen if I don’t enter into negotiations?’ Your WATNA is a good indication of how badly you need to reach a negotiated agreement.
When should you enter into negotiations?
There’s always a right and a wrong time and place for negotiations. You need to make an assessment as to whether or not you want – or are in a position – to negotiate in any given situation. To do this, you must assume or imagine that there could be other options to a negotiated agreement, and establish your own and the other parties’ BATNAs.
When is a dispute ‘ripe’ for a negotiated settlement?
According to William Zarman, the ideal conditions for pursuing a negotiated outcome are when all parties:
Knowing one’s own and one’s opponent’s BATNAs and EATNAs [and WATNAs] is critical to successful negotiation.
- Share similar ideas about each others’ BATNAs
- Are clear about the negative consequences of not reaching an agreement
- Realise that the (transaction) costs of agreeing would be less than those of continuing to disagree. An example of this would be when litigants agree to settle out of court.
The value of identifying your BATNA
Having a robust BATNA enhances your negotiating power and position. By identifying a strong BATNA for yourself, you should be better able to avoid two pitfalls:
- Accepting terms that are unfavourable to you
- Rejecting terms that it would be in your interests to accept.
You have several possible options once you’ve identified your own BATNA.
- If the proposed agreement is better than your own BATNA, accept it.
- If the proposed agreement is not better than your own BATNA, then try to continue the negotiations in an attempt to improve the other party’s offer.
If you cannot improve their offer, consider seriously whether or not you should instead
- Withdraw from these negotiations, and/or
- Pursue your current BATNA.
What is the BATNA of the other party?
As well as your own BATNA, you need to build a picture of the options to negotiation that are open to the other party. Once you’ve painted both these scenarios, you’ll need to pass them through a reality filter, by obtaining a second opinion, for example, or by otherwise testing it using a decision-making framework (see Decision Making).
Is your BATNA sufficiently robust?
- If the other party is desperate for an agreement, then the chances are that you’re in a strong position to negotiate, and you might even be able to increase your demands.
- If they have potentially attractive options that don’t depend entirely upon the outcome of this negotiation, you’ll probably need to make some concessions.