What is a 'Best Alternative to a Negotiated Agreement (BATNA)'

A 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.

BREAKING DOWN '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. While a BATNA may not always be easy to identify, 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 it.

  3. Select the alternative action that would have the highest expected value for you.

  4. 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.

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 calculate was increasing competition in the industry and tighter regulations--all of which restricted its growth in the coming year(s) and lowered 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.

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.

Best Alternative to a Negotiated Agreement (BATNA) and Additional Negotiation Tactics

Negotiation is more than determining a series of alternatives. Understanding the nuances of negotiation tactics can help Improve professional relationships by resolving difficult disputes. They can also help you evaluate personal strengths and weaknesses in the face of conflict and learn to manage your bargaining tendencies. Finally, you can study common and potentially manipulative negotiation tactics that some people employ and understand how to neutralize their effects.

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