BATNA Explained

by Dr David Venter

This article explains how a negotiator can use their BATNA to achieve a better bottom line instead of settling on a bad agreement.

As most business negotiators are already aware, BATNA is an acronym for (Best Alternative To a Negotiated Agreement). However, it should be made clear at the outset that BATNA is not the so called bottom line that negotiators perceive as the means to guard themselves against reaching agreements where they give too much or receive too little.

A bottom line signifies the worst possible outcome that a negotiator might accept. The bottom line is meant to act as the final barrier where a negotiation will not proceed further. It is a means to defend oneself against the pressure and temptation that is often exerted on a negotiator to conclude an agreement that is self defeating. Although bottom lines definitely serve a purpose, they also regrettably foster inflexibility, stifle creativity and innovation, and lessen the incentive to seek tailor-made solutions that resolve differences.

In contrast to a bottom line, a BATNA is not interested in the objectives of a negotiation, but rather to determine the course of action if an agreement is not reached within a certain time frame. As a gauge against which an agreement is measured, it prohibits a negotiator from accepting an unfavourable agreement or one that is not in their best interests because it provides a better option outside the negotiation.

Since BATNA is the alternative to what a negotiated agreement would be otherwise, it permits far greater flexibility and allows much more room for innovation than a predetermined bottom line. When a negotiator has a strong BATNA, they also have more power because they possess an attractive alternative that they could resort to if an acceptable agreement is not achieved.

When creating a BATNA, a negotiator should:

  • Brainstorm a list of all available alternatives that might be considered should the negotiation fail to render a favourable agreement;
  • Chose the most promising alternatives and expand them into practical and attainable alternatives; and
  • Identify the best of the alternatives and keep it in reserve as a fall-back during the negotiation.

Although it would be absurd to start a negotiation with a predetermined decision not to find an agreement, a viable BATNA acts as an essential insurance policy. A well conceived and clearly defined BATNA gives a negotiator the advantage to break off the negotiation if it becomes clear that a beneficial outcome is not possible. The negotiator would then know the consequences should the negotiation fail. The 'willingness' of a negotiator to break off a negotiation allows the negotiator to adopt a more firm and forceful stance when proposing ideas and interests as the basis for an agreement.

In deciding whether a BATNA should be revealed to the other party/ parties will depend on the strength/attractiveness of the BATNA. If a negotiator has a strong BATNA, it may be beneficial to disclose it, as this would prevent the other party/ parties from acting as if a viable alternative didn't exist. However, if a negotiator has a weak BATNA, it would be better not to disclose the BATNA, especially if the other party indicates they are over-estimating their own BATNA as this would prove to be a bonus that should not be squandered through disclosure.

A negotiator who knows more about the alternatives available to the other party/ parties will be more able to prepare for a negotiation. Should a negotiator learn that the other party is over-estimating its BATNA before the start of a negotiation, then they will be able to effectively use this information to lower the negotiation expectations of the other party.

In situations where both parties possess a strong BATNA, the negotiation would seem rather fruitless because there would be very little incentive to reach an agreement. In this scenario, both parties would be better off to seek elsewhere to pursue their business.

When a negotiator fails to explore its BATNA, they will find themselves in a very shaky situation. They will be exposed to:

  • Strong internal pressure to make an agreement, as they will be unaware of what would happen should the negotiation fail;
  • They will be over optimistic about proposed agreements which can then result in the associated costs not being fully appreciated;
  • They will face the peril of becoming committed to reach an agreement, as they will be unaware of alternatives outside the negotiation. This will foster pessimism about their prospects if the negotiation fails; and
  • They will become beholding to the whims of the law of agreement, which holds that when persons agree to something this is entirely dependent on the attractiveness of the available alternatives.

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3 of 4 people found the following comment useful:

BATNA vs WATNA - 2013 Apr 7
Commentator: Josh Roles (United Kingdom - Southampton)

"HYour article has been extremely helpful in clearing up exactly what the uses of assessing your BATNA can achieve, alongside the pitfalls if you don't realise your BATNA. You've been extremely thorough in your explanations, however, I have also learnt of your WATNA - Worst alternative - and although I acknowledge this is a genuine term, I can't but help feel that it is a little obvious and pointless to determine your 'WATNA'. isn't that just common sense?

I can see how BATNA is very useful in negotiation and bargaining - especially in sales - but sales is mostly about relationship building and correct communication. It's all very well determining and assessing your best alternative, but are there any skills that you should acquire in order to achieve a positive agreement? For example, reading somebodys body language or speaking in a certain manner - would this all aid the success of achieving your goal?

Thanks again for a great read!

If you have any time, I've just written a blog on BATNA and negotiation
http://rolesrelations.wordpress.com/2013/03/18/buying-with-batna-gone-in-60-seconds/

It explains the process, related to selling a car.

Regards - Josh"

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4 of 6 people found the following comment useful:

in defense of William Li - 2012 Apr 4
Commentator: D. Cook (United States - Oregon)

"Tom-if read carefully, William was not implying the Opium war was 2000 years ago, he was implicating the Chinese have had negotiation "skill and strategy" which he claims has been recorded in history books dated 2000 years ago. At least that was my interpretation. Good article and comments overall."

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29 of 31 people found the following comment useful:

Summary of the article - 2009 Dec 6
Commentator: Tom (tom.369@hotmail.com) (Australia - New South Wales)

"Having read and put into practice the Harvard Negotiation Project's 'Getting To Yes: Negotiating Agreement Without Giving In', I believe the article here is well written. It explains what a BATNA is and then contrasts it to a bottom line. Fisher, Ury & Patton conceived the term BATNA. Their book is the most solid framework for how to approach negotiations I have read. I highly recommend it.

The only shortcoming of this article as I see it is that it does not shed light on the procedural differences between arriving at a bottom line and arriving at a BATNA.

A bottom line is set arbitrarily. It has no external reference point. A BATNA, on the other hand, is a course of action which is available should a negotiator be unable to reach an agreement in the negotiation. It is a clearly identifiable course of action. If you have invested time in finding out what your BATNA is, you deepen your power and are more able to negotiate confidently. The article explains this well in the conclusion.

With regards to William Li's response, the first Anglo-Chinese 'Opium' war was fought in the late 1830s/early 1840s. This makes it a 170 year history - not 2,000 years. The conclusion may be correct. It is not supported by the evidence presented."

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20 of 31 people found the following comment useful:

Qing Dynasty vs. Return of Hong Kong - 2009 Jul 6
Commentator: William Li (China - Shanghai)

"When Qing Dynasty negotiated during post Opium War, they did not have any BATNA and the Brits knew. Qing government had no alternatives (so they thought), and unwilling to create new BATNA, led to the concession of Hong Kong. 158 years later, PRC turned the tide. Britts had no BATNA and was unable to create one, not after the Falkland Island War. Brits knew how costly and risky to engage an immediate war with China that has nuclear capabilities. Not to mention the economic ties and heavy investments of the Brits. A war would be a painful one. Without BATNA, this time, the Britts have to follow the old path of negotiation--concession. However, the Chinese learnt their lessons on the importance of maintaining good relationship after negotiation, thus gave the Britts plenty of economic manoeuvring room to continue their prosperity. This kind of skill and strategy has already been recorded in the Chinese history books 2000 years ago."

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