What Is the Best Alternative to a Negotiated Agreement (BATNA)?
The best alternative to a negotiated agreement (BATNA) is the course of action that a party engaged in negotiations will take if talks fail, and no agreement can be reached. Negotiation researchers Roger Fisher and William Ury coined the term BATNA in their 1981 bestseller "Getting to Yes: Negotiating Agreement Without Giving In." A party's BATNA refers to what a party can fall back on if a negotiation proves unsuccessful.
- BATNAs exist when negotiations are not agreeable to the parties involved.
- A BATNA represents the most attractive option available if negotiations fail.
- BATNAs are used to determine the reservation value–the worst possible offer a negotiator is willing to accept.
- Negotiators can also improve their position by exploring multiple BATNAs.
- If possible, general negotiations are often a better and quicker strategy.
Understanding a Best Alternative to a Negotiated Agreement (BATNA)
Parties may tailor BATNAs to any situation that calls for negotiations, ranging from discussions of a pay hike to resolving more complex situations like mergers.BATNAs are vital to negotiation because a party cannot make an informed decision about whether to accept an agreement unless they understand their alternatives. While a BATNA may not always be easy to identify, Harvard researchers have outlined several steps to help clarify the process:
- List all alternatives if your current negotiation ends in an impasse.
- Evaluate your alternatives based on the value of pursuing an alternative.
- Select the alternative action(s) that would have the highest expected value for you.
- After you have determined your BATNA in Step 3, calculate your reservation value or the lowest-valued deal you are willing to accept.
If the value of the deal proposed to you is lower than your reservation value, you should reject the offer and pursue your BATNA. However, if the final offer is higher than your reservation value, you should accept the offer.
A strong BATNA can also help a party understand that it has an appealing alternative to the deal and can walk away from a tempting offer.
Negotiation is more than determining a series of alternatives. Understanding the nuances of negotiation tactics can help improve professional relationships by resolving difficult disputes. Understanding negotiation can also help you evaluate personal strengths and weaknesses in the face of conflict and learn to manage your bargaining tendencies. Finally, studying the common and potentially manipulative negotiation tactics employed by some people can help negotiators to neutralize their effects.
In order to reach the best possible outcome, it is important to do as much preparation as possible before entering into negotiations. This means not only should you prepare a strong BATNA in advance, you should also research into the BATNAs available to the opposing party. Conversely, you should expect the other party to do the same–don't let the other side attempt to downplay your BATNA.
It is also possible to prepare multiple BATNAs, contrary to what the word "best" might lead you to believe. In fact, you should have as many as possible–the more BATNAs in your arsenal, the more cards you have to play at the negotiating table.
Despite the name, you can prepare multiple BATNAs, giving you a stronger negotiating position.
While there are clear advantages to understanding all the available options, it is still possible to reach an unsatisfactory result. There are many possible pitfalls facing a difficult negotiation, and it is important for negotiators to remain discipline when pressured by the opposing party.
It is also important to understand the value of all the alternatives available. If a negotiator places too high a value on the other party's hand, they risk making big concessions for very few benefits. If a negotiator undervalues the other party's hand, they may talk themselves into a position that can never be resolved.
Many negotiators become emotionally invested in a successful outcome, especially if they have already spent a lot of time at the bargaining table. This is the sunk cost fallacy–a skilled negotiator should always be ready to walk away. Conversely, one is also likely to come under pressure from the opposing negotiators, who will do their best to diminish the value of your BATNAs.
Advantages and Disadvantages of BATNA
A strong BATNA can be a valuable card at the negotiating table, allowing parties to ground their positions on a factual basis rather than emotions. Strong BATNAs also ensure a backup plan, so that the organization will not be interrupted if the negotiations fail. It also makes a failure less likely; the stronger the BATNA, the more likely the opposing party is to seek a mutual agreement.
However, the BATNA process also has its costs. Depending on how complicated the business at hand is, finding the best alternative can be a lengthy and expensive process in itself. It is also not an infallible process, and negotiators run the risk of miscalculating their options or overlooking some of the possibilities.
Pros & Cons of BATNA
Provides a backup plan if negotiations fail.
Makes agreement more likely, as a strong BATNA is more likely to bring counterparties to agreement.
Allows negotiations from a sound factual basis.
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.
Example of a Best Alternative to Negotiated Agreement (BATNA)
For example, Company A makes a takeover offer of $20 million to Company B. Yet Company B believes they are worth $30 million in valuation. Company B quickly rejects the offer. However, what Company B did not take into account is the increasing competition in the industry and tighter regulations—all of which will restrict its growth in the coming year(s) and lower its valuation.
If Company B had taken time to incorporate these factors into the current valuation, and clearly moved through the four BATNA steps, including #2, evaluating the alternative of staying the course in a difficult business environment, management might have been persuaded to accept. They would have included these potential risks in their estimate of the reservation value–the worst possible outcome a negotiator is prepared to accept.
How Do I Find My BATNA?
The first step to determining a BATNA is to list all the possible courses of action that will be available if the negotiations fail. Next, evaluate the value of each alternative, and determine which ones are most attractive. Having calculated your BATNA, you can now make a determination about the lowest-value deal you should be willing to accept.
Should I Reveal My BATNA in Negotiations?
While revealing a strong BATNA can provide valuable leverage, a weak BATNA should never be revealed, because that will only give the opposing side more reason to hold out for more concessions. For example, in employment negotiations, a strong counteroffer from another employer can help you bargain for a higher salary or more vacation time; revealing a weak counteroffer simply shows that you have no advantages to going elsewhere.
What Is a Strong BATNA?
A BATNA, or Best Alternative to Negotiated Agreement, represents the best option to one party in a negotiation if the talks fail. A strong BATNA means that that party has a reasonably attractive alternative to negotiation; if they fail to reach agreement, they can implement the BATNA with minimal disruption.
What Is the Difference Between BATNA and Reservation Value?
A BATNA represents the best option available to one party if negotiations fail, while a reservation value represents the worst deal they would be willing to accept. A reservation value should always be higher than the BATNA. For example, when buying a car, the BATNA might represent the option of shopping at another dealer. The reservation value would represent the highest price you are willing to pay, depending on the cost of finding other dealers.