BATNA - Best Alternative

Having available options during a negotiation is a good alternative which empowers you with the confidence to either reach a mutually satisfactory agreement, or walk away to a better alternative.

"Don't put all your eggs in one basket." It's an old saying which has stood the test of time. Some of you urbanites, sitting in your cubicles, may be scratching your heads and wondering, 'What in the name of Hades does this mean?' Meanwhile, back out there in the countryside, a ruddy faced farmer, is likely rolling his eyes and patiently explaining, that should you trip on the way back to the kitchen, eggs are no longer on the breakfast menu.

To a negotiator, this wise old proverb illustrates that if you bring only a single proposal to the table, you may likely end up with a rotten deal, or no deal at all. You need to have an alternative plan waiting in the wings.

It should be fairly obvious that not every negotiation is going to get tucked away in a nice, neat settlement package. This is where BATNA comes to the rescue for those of you sensible enough, to have heeded the sage advice of that  old farmer who coined the above proverb many ages ago.

BATNA means 'Best Alternative to a Negotiated Agreement'. This is your alternate plan when the talks start to wobble out of control. It can also be your trump card to make the deal happen to your advantage, or walk away from it altogether.

Let's illustrate BATNA by using a simple example. In the first scenario, let's say that you are a buyer who goes to a supplier to purchase some badly needed parts to complete a project. The supplier senses your urgency; his eyes begin to gleam with anticipation. You want the lowest price possible while he wants the higher price. Oh! Oh! You have no fall-back position. You're both in the boat, but it's the supplier who's holding the oars, so guess who decides where the boat makes land?

On the other hand, say you go to the meeting prepared. Before arranging the meet, you set up talks with 2 other suppliers who are ready and able to handle all your needs. When you meet with the first supplier in this second scenario, you can calmly sit back in your chair, and allow the supplier to finish his spiel. Now, watch the gleam fade from his eyes when you spring the little titbit, about his competitors willingness to solve your problem. You have BATNA! The talks suddenly become more amenable. So, who's holding the oars now?

BATNA or NO BATNA? That is the Question

The power of your BATNA is a matter of scale. When you have a strong alternative solution to a lousy proposal, you have leverage to build a more potent proposal. If not, then you can turn to your best alternative solution. A strong BATNA is like a warm, fuzzy insurance policy. A strong alternative provides you with two possibilities. Either you settle an agreement with more favourable terms, or you have the option to simply say, 'No dea1!'

BATNA doesn't come in a package. It comes from planning and preparation. It is a two fold process. First, you have to determine all your available options. Then, you must also realistically estimate your counterpart's alternatives. Each is equally important. Otherwise, it will be impossible to gauge the strength of your best alternative in relation to their best alternative.

Your plan should be a flexible approach. It is important to keep in mind that both your approach, and your alternatives, should be able to bend in the wind and weather the unexpected storm. A negotiator may enter the talks with a preconceived idea of the best alternatives available to both parties, but must not be bound by them.

Circumstances can alter rapidly. Unexpected changes can be anything from new information on the table; a sudden rise in costs due to political upheaval; new legislation: or, even a climatic intervention such as an unexpected and untimely frost. A sudden shift in conditions can immediately affect the strength of either parties BATNA during the negotiation process.

What's in Your BATNA?

How do you determine your best alternatives to a negotiated agreement? First, you have to dissect both your position and your interests. Then, look at the sum of these parts relative to all the alternative options available. Pick the best option. Finally, do the reverse from your counterparts perspective. A well prepared negotiator looks at the whole picture.

Some of the most crucial factors which should be considered include;

  • The cost - Ask yourself how much it will cost to make the deal relative to the cost of your best alternative. Cost estimation may entail both the short term and the long term. It boils down to figuring out which of your options is the most affordable.
  • Feasibility - Which option is the most feasible? Which one can you realistically apply over all the rest of your available options?
  • Impact - Which of your options will have the most immediate positive influence on your current state of affairs?
  • Consequences - What do you think or estimate will happen as you consider each option as a possible solution?

Mine Is Not Necessarily Bigger Than Yours!

Is that your ego showing? Put that thing away right now! After all the work you put into estimating your BATNA, you might be feeling pretty smug. Studies have clearly shown that it is an all 'too human' tendency to overestimate the strength of one's own BATNA, while underestimating the strength of your counterpart's. 

The underlying danger occurs at the point when one party reveals an over-estimated BATNA too early in the talks. Having put all their cards on the table too soon, they call the other side. Suddenly, they find that their big hand really equates to a pair of deuces facing a full house. Kiss that pot goodbye!

The other side of the coin happens when you are absolutely certain that you have the stronger BATNA. Let's suppose you know the other party needs to make a deal, and they have no options available except to turn to your company. Now is the perfect time to put your own powerful BATNA on the table. The BATNA you employ can act as a powerful leverage while you decide whether or not to make the deal. As always, gauge the situation accordingly. Timing can mean everything in determining when to put your BATNA on the table.

Boosting Your BATNA

In the reverse situation, what can you do with a weak BATNA? Can your turn the tables? Yes, there are two ways this might be accomplished. The first possibility is to strengthen your own BATNA. The second way is to reduce the BATNA of your counterpart.

  • Be Creative - Simply ask yourself what other options you might employ that could increase your bargaining position. Brainstorm the situation with all the key players in your organization. Your planning must also factor in your counterpart's interests and options.
  • Improve Your BATNA - Endeavour to expand your options. One possibility is to consider bringing into the mix, other interested third party partners. A third parties interests may coincide with key components of your interests, or of your counterpart's. For example, this might entail creative financing which presents a more attractive option to your counterpart. If you weaken the other sides best alternative by injecting another element into the mix, the game takes on a whole new slant.
  • Use Experts - Neutral parties with their own relevant expertise might be able to unravel your problem into a newly designed, but more attractive perspective. If your side lacks some area of expertise, get the experts to lend a hand.

Summary

Failing to have available options during a negotiation is simply unwise. Having a good alternative empowers you with the confidence to either reach a mutually satisfactory agreement, or walk away to a better alternative.

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62 of 67 people found the following comment useful:

Good illustrations - 2008 May 1
Commentator: Dr Piotr Jednaszewski (Poland)

"Presented illustration of BATNA shows clearly as the proverb says: "Don't put all your eggs in one basket." Nowadays many managers overuse BATNA in negotiations instead of having it as the last resource. Presented examples are down to earth and sufficiently illustrate how to work out the problems using BATNA."

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