BATNA

In negotiation theory, the best alternative to a negotiated agreement or BATNA is the

course of action that will be taken by a party if the current negotiations fail and an
agreement cannot be reached.
If the current negotiations are giving you less value than your BATNA, there is no point
in proceeding. Prior to the start of negotiations, the parties should have ascertained
their own individual BATNAs.
BATNA was developed by negotiation researchers Roger Fisher and Bill Ury of the
Harvard Program on Negotiation (PON), in their series of books on Principled
Negotiation that started with Getting to YES. Nobel Laureate John Forbes Nash has
included such ideas in his early undergraduate research.
For example, if I have a written offer from a dealer to buy my car for $100 dollars, then
my BATNA when dealing with other potential purchasers would be $100 since I can get
$100 for my car even without reaching an agreement with such alternative purchaser.
A party should generally never accept a worse resolution than its BATNA. Care should
be taken, however, to ensure that deals are accurately valued, taking into account all
considerations (such as relationship value, time value of money, likelihood that the
other party will live up to their side of the bargain, etc.) These other considerations are
very difficult to value, since they are often based on uncertain considerations, rather
than easily measurable and quantifiable factors.
Examples of other offers that might or might not be better than the BATNA in the
example above might be:
An offer of $90 by a close relative (is the goodwill generated worth $10 or more?)
An offer of $125 in 45 days (what are the chances of this future commitment falling
through, and would my prior BATNA ($100) still be available if it did?)
An offer from another dealer to offset $150 against the price of a new car (do I want to
buy a new car right now, the offered car in particular? Also, is the probably minuscule
reduction in monthly payments worth $100 to me today?)
BATNA is seen in negotiation fields as the single most important source of negotiation
power. Negotiators don't use their BATNA merely as a safety net, but rather as a point of
leverage in negotiations.
Consider the following business example: Company one can choose to buy from
companies two, three and four - but companies two, three and four can only sell to
company one. Company one can use their powerful BATNA position to leverage a better
deal by playing companies two, three and four against each other. This is a common
practice among purchasing and procurement managers in the business world.
Whilst your alternative options, and therefore your BATNA might be known to you, very
often your BATNA may not be. So time and energy are demanded to figure out which
options are really available to you and actionable. Even if your alternative options are
known, they need to be real and actionable. A Project on Negotiation Executive Seminar
experiment and other experiments have proven that most managers overestimate their
BATNA whilst simultaneously investing too little time into researching their real
options. This results in poor or faulty decision making from overconfidence and good
choices being rejected
What BATNAs Are
BATNA is a term coined by Roger Fisher and William Ury in their 1981 bestseller,
Getting to Yes: Negotiating Without Giving In.[1] It stands for "best alternative to a
negotiated agreement." BATNAs are critical to negotiation because you cannot make a
wise decision about whether to accept a negotiated agreement unless you know what
your alternatives are. Your BATNA "is the only standard which can protect you both
from accepting terms that are too unfavorable and from rejecting terms it would be in
your interest to accept."[2] In the simplest terms, if the proposed agreement is better
than your BATNA, then you should accept it. If the agreement is not better than your
BATNA, then you should reopen negotiations. If you cannot improve the agreement,
then you should at least consider withdrawing from the negotiations and pursuing your
alternative (though the costs of doing that must be considered as well).
Having a good BATNA increases your negotiating power. Therefore, it is important to
improve your BATNA whenever possible. Good negotiators know when their opponent
is desperate for an agreement. When that occurs, they will demand much more, knowing
their opponent will have to give in. If the opponent apparently has many options outside
of negotiation, however, they are likely to get many more concessions, in an effort to
keep them at the negotiating table. Thus making your BATNA as strong as possible
before negotiating, and then making that BATNA known to your opponent will
strengthen your negotiating position.
"The reason you negotiate is to produce something better than the results you can
obtain without negotiating. What are those results? What is that alternative? What is
your BATNA -- your Best Alternative To a Negotiated Agreement? That is the standard
against which any proposed agreement should be measured." -- Roger Fisher and
William Ury
Guy Burgess and Heidi Burgess have adapted the concept of BATNA slightly to
emphasize what they call "EATNAs" estimated alternatives to a negotiated agreement"
instead of "best alternatives." Even when disputants do not have good options outside of
negotiations, they often think they do. (For example, both sides may think that they can
prevail in a military struggle, even when one side is clearly weaker, or when the relative
strengths are so balanced that the outcome is very uncertain.) Yet, perceptions are all
that matter when it comes to deciding whether or not to accept an agreement. If a
disputant thinks that he or she has a better option, she will, very often, pursue that
option, even if it is not as good as she thinks it is.
BATNA and EATNAs also affect what William Zartman and may others have called
"ripeness," the time at which a dispute is ready or "ripe" for settlement.[3] When parties
have similar ideas or "congruent images" about what BATNAs exist, then the negotiation
is ripe for reaching agreement. Having congruent BATNA images means that both
parties have similar views of how a dispute will turn out if they do not agree, but rather
pursue their other rights-based or power-based options. In this situation, it is often
smarter for them to negotiate an agreement without continuing the disputing process,
thus saving the transaction costs. This is what happens when disputing parties who are
involved in a lawsuit settle out of court, (which happens in the U.S. about 90 percent of
the time). The reason the parties settle is that their lawyers have come to an
understanding of the strength of each sides' case and how likely each is to prevail in
court. They then can "cut to the chase," and get to the same result much more easily and
more quickly through negotiation.
On the other hand, disputants may hold "dissimilar images" about what BATNAs exist,
which can lead to a stalemate or even to intractability. For example, both sides may
think they can win a dispute if they decide to pursue it in court or through force. If both
sides' BATNAs tell them they can pursue the conflict and win, the likely result is a power
contest. If one side's BATNA is indeed much better than the other's, the side with the
better BATNA is likely to prevail. If the BATNAs are about equal, however, the parties
may reach a stalemate. If the conflict is costly enough, eventually the parties may come
to realize that their BATNAs were not as good as they thought they were. Then the
dispute will again be "ripe" for negotiation.
The allure of the EATNA often leads to last-minute breakdowns in negotiations.
Disputants can negotiate for months or even years, finally developing an agreement that
they think is acceptable to all. But then at the end, all the parties must take a hard look
at the final outcome and decide, "is this better than all of my alternatives?" Only if all
the parties say "yes," can the agreement be finalized. If just one party changes his or her
mind, the agreement may well break down. Thus, knowing one's own and one's
opponent's BATNAs and EATNAs is critical to successful negotiation
Additional insights into BATNA are offered by Beyond Intractability project
participants.
Determining Your BATNA
BATNAs are not always readily apparent. Fisher and Ury outline a simple process for
determining your BATNA:
1. develop a list of actions you might conceivably take if no agreement is reached;
2. improve some of the more promising ideas and convert them into practical options;
and
3. select, tentatively, the one option that seems best.[4]
BATNAs may be determined for any negotiation situation, whether it be a relatively
simple task such as finding a job or a complex problem such as a heated environmental
conflict or a protracted ethnic conflict.
Fisher and Ury offer a job search as a basic example of how to determine a BATNA. If
you do not receive an attractive job offer by the end of the month from Company X, what
will you do? Inventing options is the first step to determining your BATNA. Should you
take a different job? Look in another city? Go back to school? If the offer you are waiting
for is in New York, but you had also considered Denver, then try to turn that other
interest into a job offer there, too. With a job offer on the table in Denver, you will be
better equipped to assess the New York offer when it is made. Lastly, you must choose
your best alternative option in case you do not reach an agreement with the New York
company. Which of your realistic options would you really want to pursue if you do not
get the job offer in New York?
More complex situations require the consideration of a broader range of factors and
possibilities. For example, a community discovers that its water is being polluted by the
discharges of a nearby factory. Community leaders first attempt to negotiate a cleanup
plan with the company, but the business refuses to voluntarily agree on a plan of action
that the community is satisfied with. In such a case, what are the community's options
for trying to resolve this situation?
They could possibly sue the business based on stipulations of the Clean Water Act.
They could contact the Environmental Protection Agency and see what sort of authority
that agency has over such a situation.
They could lobby the state legislature to develop and implement more stringent
regulations on polluting factories.
The community could wage a public education campaign and inform citizens of the
problem. Such education could lead voters to support more environmentally minded
candidates in the future who would support new laws to correct problems like this one.
In weighing these various alternatives to see which is "best," the community members
must consider a variety of factors.
Which is most affordable and feasible?
Which will have the most impact in the shortest amount of time?
If they succeed in closing down the plant, how many people will lose their jobs?
These types of questions must be answered for each alternative before a BATNA can be
determined in a complex environmental dispute such as this one.
BATNAs and the Other Side
At the same time you are determining your BATNA, you should also consider the
alternatives available to the other side. Sometimes they may be overly optimistic about
what their options are. The more you can learn about their options, the better prepared
you will be for negotiation. You will be able to develop a more realistic view of what the
outcomes may be and what offers are reasonable.
There are also a few things to keep in mind about revealing your BATNA to your
adversary. Although Fisher and Ury do not advise secrecy in their discussions of
BATNAs, according to McCarthy, "one should not reveal one's BATNA unless it is better
than the other side thinks it is."[5] But since you may not know what the other side
thinks, you could reveal more than you should. If your BATNA turns out to be worse
than the opponent thinks it is, then revealing it will weaken your stance.
BATNAs and the Role of Third Parties
Third parties can help disputants accurately assess their BATNAs through reality testing
and costing. In reality testing, the third party helps clarify and ground each disputing
party's alternatives to agreement. S/he may do this by asking hard questions about the
asserted BATNA: "How could you do that? What would the outcome be? What would
the other side do? How do you know?" Or the third party may simply insert new
information into the discussion...illustrating that one side's assessment of its BATNA is
likely incorrect. Costing is a more general approach to the same process...it is a
systematic effort to determine the costs and benefits of all options. In so doing, parties
will come to understand all their alternatives. If this is done together and the parties
agree on the assessment, this provides a strong basis upon which to come up with a
negotiated solution that is better than both sides' alternatives. But if the sides cannot
come to such an agreement, then negotiations will break down, and both parties will
pursue their BATNA instead of negotiation.
Importance of batna
BATNA is the acronym for Best Alternative To a Negotiated Agreement. If you look at it
from the simplest standpoint, your BATNA is the choice you can make if you conclude
that negotiating with a particular party is not likely to yield a favorable result. You can
walk away from a negotiation if your BATNA is better than the likely outcome of that
negotiation.
BATNA, however, covers far more than that. One view says that BATNA is the measure
of the balance of power in a negotiation. If other parties need you in order to reach their
objectives, your BATNA is strong; your negotiating circumstances are strong. If you
want to buy a new car and the same model is for sale at several car dealers, you have a
strong BATNA because you can benefit from their competition for your business.
It is crucial to think of BATNA as having two stages in a negotiation. You start off with
your 'walking-in' BATNA; the things you can influence or control before the negotiation
begins. However, once negotiation starts, the BATNA is a dynamic element, changing as
you derive information about the interests of other parties and their constituencies and
as you compare the resources each party (including you) has available to bring about
and fulfill an agreement.
You can think of BATNA in negotiation like playing a game of cards. Your walking-in
BATNA may be the first cards you are dealt. In many card games, your hand may change
during the play as new cards are dealt to you (and others). So your BATNA changes as
new cards come into your hand. If those new cards are only known to you, you develop a
greater understanding of your own apparent strength. If the new cards are dealt to all
the players in a way that allows each player to see at least some of the cards in each
player's hand, you learn more about the comparative strength of your BATNA. In
negotiation, rather than looking at cards, we are assessing information about our own
resources, those of other negotiating parties, and the influences on each negotiator from
their constituencies.
By looking at BATNA as an ongoing, changing measure of negotiating strength, as a
mechanism for deciding whether and/or when to quit, we develop a disciplined,
informed approach to our negotiations.