Insights into Negotiations: Determine your BATNA—the best alternative to a negotiated agreement

There are so many issues to think about when it comes to planning for and engaging in negotiations. One of the most important things to consider before and during the negotiation process is your ‘BATNA’.

Roger Fisher and William Ury coined the term BATNA in their 1981 bestselling book on negotiations, ‘Getting to Yes: Negotiating Agreement Without Giving In’, and highlighted the important role of the BATNA if a negotiation proves difficult to conclude, and sometimes unsuccessful.

A BATNA, the Best Alternative to a Negotiated Agreement, is the contingency plan that a negotiator has during the negotiation process, and brought into play if the deliberations are not going as anticipated. Put simply, it is the action one will take if the discussions fail and no agreement can be reached. Today BATNA(S) is a major part of the negotiation preparation process and gives a negotiator option(s) to consider if the going gets tough during the discourse. With BATNA, one has an idea of a fair deal and when to ‘walk away’.

According to Fisher and Ury, “The reason one negotiates is to produce something better than the results one can obtain without negotiating. What are those results? What is that alternative? What is the BATNA — the Best Alternative to a Negotiated Agreement?

To them, that is the standard against which any proposed agreement should be measured.”

Entering a serious negotiation without a solid BATNA is risky as the BATNA not only gives a negotiator ‘Plan B’ if a negotiation falls through, it also puts the deal maker in a powerful position while negotiating.

BATNAs are vital because negotiators cannot make informed decisions on whether or not to agree to a negotiation if they do not know and understand the potential alternatives to that agreement. Knowing your BATNA(S) prevents temptations to accept an offer that is not the best alternative, and allows the broker to negotiate based on facts and not emotions. A strong BATNA is, thus, a valuable card to have at the negotiation table and may encourage the opposing party to push for a mutual agreement. While having the ‘best’ possible alternative is essential, you don’t only need to have one BATNA, Negotiations experts Chis Voss, Simon Norton, and Tony Rossiter recommended.

According to Marrianne Eby, negotiators should have more than one BATNA.

“In fact, you should have more than one, because the more you have, the greater your flexibility and power. BATNAs can vary from a move as simple as finding a new supplier of goods or services, to one as radical as dropping a project altogether. The better conceived and more numerous your BATNAs, the less likely you’ll need them,” she argues.

One of the challenges with BATNA, according to Christopher Collins, is that it tricks some negotiators to aim low, possibly set the upper limits, and concede everything beyond that upper limit.

Eby provides the following tips when it comes to BATNAs.

• 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 an agreement. Be sure to continue working on a long-term BATNA for future use.
• Find a graceful way to ensure the other side knows you have BATNAs and you are willing to execute them.

Furthermore, she cautions that if you are not able to execute your BATNA, it is not a BATNA but a bluff.

Your BATNA prevents you from accepting terms that are unfavourable and helps to reject terms that are not in your interest to accept. If you have a strong BATNA, it is important to let the opposing side know that you have one. Revealing the BATNA in a non-threatening way will let your counterpart know that you have other options and may allow you to push harder for the outcome you desire.

However, if you only have a weak BATNA, you will want to avoid disclosing it. If your counterpart catches wind that you do not have any solid alternatives, they will know that you will be pushed to accept their offer – no matter how unattractive it may be.

Determining your BATNA is not always simple and may not always be immediately apparent. As part of the negotiating planning process, the negotiation team needs to engage around all of the possible options that are available to you should the negotiation fail. Once you have all of the options on the table you can evaluate the value of the alternatives and then determine the lowest value agreement (reservation value) you are willing to accept in the upcoming negotiation.

Some important factors to consider when working on your BATNA include:

1. Affordability: Determine the short and long-term costs of the agreement on hand, as well as the cost of the BATNA.
2. Viability: Which of the options is most viable?
3. Results: Which of the options will have the quickest positive impact?
4. Interests: Do the alternative options need approval by other interested parties/stakeholders before you can take action?

BATNAs can be determined for any negotiation process whether it is for deciding on a job offer, negotiating supplier agreements, or complex political negotiations.  Harvard researchers have outlined several steps to help clarify the process:

1. List all alternatives if your current negotiation ends in an impasse.
2. Evaluate your alternatives based on the value of pursuing an alternative.
3. Select the alternative action(s) that would have the highest expected value for you.
4. After you have determined your BATNA in Step 3, calculate your base value or the lowest-valued deal you are willing to accept.

Once you have determined your BATNA, it is also important to consider the alternatives available to your counterparts. The more you know about their options, the better you will be prepared for the negotiation. If you are aware of their options you will be able to enter the negotiation with a realistic expectation of what a mutually beneficial agreement would be.

A six-year research* into director-level perceptions of various aspects of supply chain management by PanAvest International investigated director-level perceptions of negotiations in the supply and value chain management environment.

The purposive study*, entitled: ‘Director-Level Perceptivities on Aspects Of Negotiations’, drew on a sample of approximately 64 international organisations, including Fortune 1000, FSTE 250, and JSE 100 companies, as well as state-owned enterprises and government departments. The study involved various CEOs, CFOs, COOs, directors, and officers from engineering, marketing, logistics, supply chain management, project management, procurement, and related industries.

Examining an array of issues relating to negotiations, bargaining, agreements, and contracts, the focused study found the following: In Africa, approximately

1. 6 percent of public sector lead negotiators were familiar with the term BATNA.
2. 25 percent of private sector procurement practitioners were familiar with the process to follow to determine BATNA.
3. 4 percent of developmental project negotiations involved the pre-establishment of BATNA(S)

Could this be one of the main reasons why there are numerous unfortunate and sometimes heart-breaking regional-wide agreements, associated contracts and project cost overruns?

James Chen summarily provides some of the benefits and drawbacks associated with BATNA

Benefits

• Provides a backup plan if negotiations fail.
• Makes agreement more likely, as a strong BATNA is more likely to bring counterparties to the agreement.
• Allows negotiations from a sound factual basis.

Drawbacks

• 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.

To recap, negotiators entering any form of negotiation need to ensure they have considered their BATNAs and the options available to them should their negotiation go pear-shaped. They should also keep in mind that BATNA(S) should be used when an agreement cannot be met and ‘the alternative’ represents the most favourable option just in case the negotiations be unsuccessful. Exploring multiple BATNAs will also place negotiators in a more advantageous position.

A gentle reminder that it is always helpful as rightly pointed out by Michael Benoliel and Wei Hua to have alternative “paths to your destination so that even if the other party takes the process off track, you can still find a way to achieve your goals”.

To conclude, no agreement is better than a bad agreement! Thus, it is important that one is confident about their respective BATNA(s) and be prepared to accept a no-deal outcome.

>>>the writer is an international chartered director and Africa’s first-ever appointed Professor Extraordinaire for Industrialisation and Supply Chain Governance.  He is the CEO of PanAvest International and the founding non-executive chairman of MY-future YOUR-Future and OUR-Future (“MYO”) and the highly popular daily Nyansa Kasa series. He is currently the non-executive chairman of the Minerals Income and Investment Fund (MIIF). Professor Boateng was previously the non-executive chairman of the Public Procurement Authority (PPA). For more information on Nyansakasa visit www.myoglobal.org.