BATNA Explained

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 or walk away 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 pre-determined 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 skilled 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.

Spotio suggests that 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 similar or superior BATNA, then given similar negotiation skills, 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.