Best alternative to a negotiated agreement
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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. BATNA is the key focus and the driving force behind a successful negotiator. BATNA should not be confused with the reservation point or walkaway point. A party should generally not 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 and the likelihood that the other party will live up to their side of the bargain. These other considerations are often difficult to value, since they are frequently based on uncertain or qualitative considerations, rather than easily measurable and quantifiable factors.
The BATNA is often seen by negotiators not as a safety net, but rather as a point of leverage in negotiations. Although a negotiator's alternative options should, in theory, be straightforward to evaluate, the effort to understand which alternative represents a party's BATNA is often not invested. Options need to be real and actionable to be of value[1], however without the investment of time, options will frequently be included that fail on one of these criteria.[citation needed] A Program on Negotiation Executive Seminar experiment and other experiments have demonstrated that most managers overestimate their BATNA whilst simultaneously investing too little time into researching their real options.[citation needed] This can result in poor or faulty decision making and negotiating outcomes.
BATNA was developed by negotiation researchers Roger Fisher and William 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.[citation needed]
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[edit] Examples
The following examples illustrate the basic principles of identifying the BATNA and how to use it in further negotiations to help value other offers.
[edit] Selling a car
If I have a written offer from a dealer to buy my car for $100, 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.
In this example, other offers that illustrate the difficulty of valuing qualitative factors might include:
- 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?)
[edit] Purchasing
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.
[edit] References
[edit] Distributive and Integrative Negotiations
Harvard Business School
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The Difference Between Integrative and Distributive Negotiation
There are two types of negotiation: "integrative" and "distributive." Integrative negotiations are those typically referred to as "win/win" negotiations: all sides are looking for a solution that maximizes joint gain and allows everyone to walk away feeling like they won something. They involve looking at the issues being negotiated from multiple angles, considering multiple issues at once (thus allowing for trade-offs), and honestly trying to "expand the pie" rather than divide it. Anyone who imagines that they might see or do business with their fellow negotiator in the future should be attempting to negotiate in this way. Integrative negotiations foster trust and good working relationships, and leave all parties feeling good, not just one.
Distributive negotiations, on the other hand, are typically described as "win/lose" negotiations – one party gets what they want, and the other party gives something up. Think of negotiating for your car – you either get that extra $1000, or the dealership does. If you feel you got a good deal (and squeezed that salesman), you "won." If you walk away feeling like you paid too much money, you "lost." This type of negotiating does not lead to good long-term relationships. The parties’ interests are often opposed (or seem to be opposed – this may not prove to be the case once you start getting creative), and usually good feelings are not plentiful when the negotiation is over.
Characteristic Integrative Negotiations Distributive Negotiations Outcome Win / win Win / lose Motivation Joint gain Individual gain Interests Congruent Opposed Relationship Long-term Short-term Issues Multiple issues Single Issue
Here’s a story (probably familiar to many of you!) that demonstrates the difference between integrative and distributive negotiations: Two sisters were fighting over the last orange in the fruit bowl. They went back and forth, each girl insisting that she should get it and both refusing to give up. They were about to agree on cutting the orange in half when their aunt walked in and realized what was going on. She turned to the girls and asked them each why they wanted the orange. As it turns out, one wanted to eat the orange, and the other wanted the peel for an art project she was working on. Once they realized this, they were able to "split" the orange in such a way that both got exactly what they wanted. The girls were engaged in distributive negotiations (though it probably felt like bickering to them), while their aunt was suggesting an integrative solution.
As you might have guessed by now, partnership negotiations should always be integrative. The goal in any partnership should be maximizing all parties’ abilities to advance their collective mission, and to enable both to better serve the community, deal effectively with their economic obligations and pressures, etc. One organization should not want to "win" at the expense of the other. You want joint gain, not just individual gain, and while your specific motivations for pursuing the partnership may be different, the spirit behind your interests should be congruent. Most importantly, you are entering into a long-term relationship with your prospective partner(s), and you want this to be a good relationship. The only way to build trust and expand the pie (or the orange) in a negotiation situation is be integrative. You must do this from the beginning. Once you start down the "distributive path" it is hard to change directions, as you establish a dynamic of competition and distrust. The moral of the story: be integrative!
