How To Get The Most Out Of Your BATNA

You can get the upper hand when you know what your BATNA is
You can get the upper hand when you know what your BATNA is
Image Credit: Kari Nousiainen

Hopefully we all know what a BATNA is – it’s your best alternative to a negotiated agreement (BATNA). This is what we can use to break down barriers at the bargaining table. Going into your next negotiation we all know that you have to do some homework and make sure that you know what you would do if the negotiations didn’t work out and you had to walk away. However, once you know what your BATNA is, do you really know how to use it during a negotiation?

The Power Of A BATNA

If the next time that you are involved in a negotiation you run into an impasse, what’s your best outside option going to be? Most experienced negotiators understand that this is the time for them to evaluate their BATNA, or best alternative to a negotiated agreement. Even those negotiators who don’t know the term probably think through their BATNA instinctively as they are preparing for their next negotiation.

Every negotiator needs to take the time to find their best alternative to a negotiated agreement (BATNA). An awareness of your BATNA – particularly if it’s a strong one – can give you the confidence that you’ll need in order to walk away from a subpar agreement that has been offered to you. What you are going to need are strategies to help you take the BATNA concept to the next level and gain a critical advantage in upcoming negotiations.

Find Ways To Translate Your Current BATNA To The Current Deal

Here’s a classic example of BATNA: while haggling over a new car purchase with the dealer, you’re aware that you can purchase an identical car at a nearby dealer for $27,000. Assuming that you want only one car, you won’t pay more than $28,000 in the negotiation at hand. Unfortunately, such clear-cut BATNAs really tend to exist more in theory than in reality. In truth, your best alternative to agreement is probably rarely, if ever, an apples-to-apples comparable with the deal at hand. So what does this all mean? When negotiating, you need to take time out for an explicit translation process to ensure that you aren’t giving up a “good deal in hand for a BATNA in the bush”. Remember that rather than assuming that the deal on the table matches your BATNA point by point, you need to translate your BATNA to fully understand what it means for the current negotiation.

Make Sure That You Know What Your WATNA Is

Often times negotiators complain that their best alternative away from the table is rarely going to be a sure thing. As a result of this belief, some instead choose to focus on their worst alternative to a negotiated agreement (WATNA). Is this a wise strategy? It is probably not. For just a moment, imagine that you’re a purchasing manager trying to renegotiate a contract with a supplier. If talks reach an impasse, the worst thing that could happen is that you won’t find an alternative supplier, and your supply chain could temporarily break down. If you negotiate on this basis, you will almost certainly end up with a bad deal. If the odds of not finding an alternative supplier are roughly 5%, it would be silly to use this to negotiate on the basis of your WATNA. Instead, a better approach is to try to calculate your probabilistic BATNA – this is the full range of possibilities if the negotiation fails and the probabilities that are associated with each.

Using Decision Trees

Another approach is called decision-tree analysis, which negotiators often use to assess the BATNA of going to court if settlement talks fail, can be just as helpful. Making a decision tree involves graphing the possible outcomes of each decision that you are currently facing. Decision-tree analysis comes with three benefits. First, it will illuminate aspects of your BATNA that you can and should shore up before you negotiate. Second, a decision tree can help you assess your risk tolerance. Would you prefer a sure thing at the table or a chance at a better outside option? If you start with a risk-neutral assessment of your BATNA, and then adjust your willingness to close the current deal based on the fact that your BATNA is not a sure thing. Finally, when you are assessing your BATNA, decision trees use the “Look forward and reason back” technique. At each node in the tree, pause and ask yourself “And then what?” Even if you cannot attach probabilities all the way down the tree, you should gain a better understanding of possible moves and countermoves that may occur during the negotiations.

What All Of This Means For You

When we enter into a negotiation, we need to understand that our goal is to be able to reach a deal with the other side. We need to understand that there will always be issues that we will encounter that may block us from reaching a deal. When we encounter situations like this, we need to be able to make a decision about trying to resolve the issue or walking away. An important tool that we can use to make this kind of decision is our BATNA.

Our BATNA is our best alternative to a negotiated agreement. We need to make sure that we know what our BATNA is before we start a negotiation and we need to refer to it if we run into something that blocks our negotiations. A BATNA is a generic concept. As negotiators we need to take the time to translate our BATNA to our current negotiations. Some negotiators don’t believe that BATNA relates to the real world and they prefer to use the WATNA – worst alternative to a negotiated agreement. However, this is never a good idea. Instead, decision trees can be used to evaluate your different options.

Our goal is always to reach a deal with the other side. We never want to get blocked but it does happen. Our BATNA is a powerful tool that we can use to help resolve blockages. However, we need to know how to use our BATNA to resolve issues. Using these suggestions you can use your BATNA to resolve your next blocked negotiation.

– Dr. Jim Anderson Blue Elephant Consulting –
Your Source For Real World Negotiating Skills™

Question For You: What is the best way to determine if your WATNA should be used to when you encounter a blockage?

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