Professional negotiators and researchers alike hail the BATNA (Best Alternative to a Negotiated Agreement, or “walk away” outcome) as a negotiator’s primary source of relative power. But relying on even the best of alternatives as leverage can be tricky business. BATNAs help negotiators establish minimum or maximum thresholds beyond which a deal with a particular negotiator is of no value. In essence, they are a defense against an inferior agreement. They are not a way to reach fantastic agreements. You can do four things to improve your next negotiation: First, focus on your mutual dependence, not alternatives to an agreement. Second, find power in your context, not your feelings. Third, focus on learning, not on making the deal. Finally, treat the unknown as a place of hidden potential, not a frightening minefield.
Professional negotiators and researchers alike hail the BATNA (Best Alternative to a Negotiated Agreement, or “walk away” outcome) as a negotiator’s primary source of relative power. But relying on even the best of alternatives as leverage can be tricky business.
Your relative power in a negotiation is your capacity to use resources to influence another’s circumstances; and a BATNA’s role in that regard can range anywhere from significant to non-existent. Consider the obvious challenge of a negotiator who thinks she has a very strong alternative, but discovers that the other side has a relatively stronger one. This type of BATNA asymmetry can occur in several varieties (e.g., no BATNA vs. strong BATNA, or deals where the incentives on each side are completely different). A negotiator’s BATNA-based power in these situations is virtually meaningless as would be any corresponding strategy based on the same.
BATNAs help negotiators establish minimum or maximum thresholds beyond which a deal with a particular negotiator is of no value. In essence, they are a defense against an inferior agreement. They are not designed to facilitate relationship building, exploration, creativity, or collaboration, all of which most researchers and practitioners agree are necessary to reach the often sought for, but rarely achieved optimal or “efficient” agreement. Negotiators can take practical steps toward a more constructive approach to maximize the integrative potential of their negotiations:
Think mutual dependence, not just alternatives. Ascertaining why and how deeply one’s counterparty needs what you’re offering is central when it comes to relative power — the greater his need for you and/or your product or service, the greater your power, and vice-versa. You and your counterpart would do well to spend your efforts focusing on the power inherent in your mutual dependence. Mutual dependence is determined by the sum or the average of Party A’s dependence on Party B, and Party B’s dependence on Party A. The connection between mutual dependence and power is direct, and it exists in every negotiation.
Focusing on mutual dependence draws your attention toward inquiry and exploration, advancing the conversation from: “How much can I get out of this deal above my best alternative?” to “In how many ways can I demonstrate my company’s value to this person based on their need(s)?”
This is precisely how entrepreneur John Settles, co-owner of a relatively new company specializing in sustainability, pitched his company to a local school district. John had no previous relationship with the buyer, his business was new, and his track record was limited. His competition comprised larger and more established corporations, and alternatives, as such, were irrelevant. John rightly focused on asking probing questions and was able to identify how his company was uniquely positioned to serve not only the immediate needs of the district, but he also designed a multi-tiered plan that deepened the buyer’s interest and need for his company’s services. John turned the conversation toward ways they could mutually benefit in those areas where their mutual needs overlapped. Together, the two created a better deal — one that could potentially yield 25% more than the one they actually met to discuss.
Find power in your context, not your feelings. You’ll often hear the following statement: “When I feel I have more power in a negotiation, I negotiate better, but when the situation is reversed, I don’t do as well.” Limited research has been done on the issue of negotiators’ perceptions of power and how those perceptions affect outcomes, providing some evidence of a positive relationship between negotiators’ perceptions of their power and the degree to which they engage in bargaining.
The challenge with power that fluctuates with feelings is that this type of power often results in negotiators seeking to capture value, using their power to behaving more opportunistically, and leaving the other side feeling as though their interests are not being considered. On the other hand, the “feelings analyses” can leave negotiators feeling insecure and not being assertive enough. Power in a negotiation is NOT based on your subjective and limited view of what you have to offer, but rather the objective reality of what you have to offer in relation to the need of the other party. Feelings of power are irrelevant.
Focusing on mutual dependence can again be helpful here, providing greater psychological power for situations where positional power (or role power) and BATNA power are absent. For example, several undergraduate and graduate students have shared stories of their challenging hiring and promotion negotiations where these students had a weak or no BATNA, and felt that the employer was in the stronger position. By focusing on the power present in the respective needs of the companies in relation to their skills, they didn’t feel powerless. They strategically framed the narrative around the value of mutual gain that could be achieved by hiring or promoting them. Outcomes included 10% – 30% increases in their incoming salary offers, higher bonuses, better titles, and more vacation time. Moreover, hiring managers frequently applauded these candidates for being assertive. They felt more confident hiring someone who could respectfully, artfully, and convincingly fight for what they felt they deserved.
Focus on learning, not buying or selling. Three priorities during a negotiation should be:
- learning as much as possible about the person with whom you are dealing;
- learning as much as possible about the entity with which you are dealing; and
- ascertaining as much as possible about his/her/its circumstances.
Who is this person? How many years have they been working in this industry? How long have they been working for this organization? How is this person rewarded in his or her organization? Is this a big project for this person or entity, or a small, relatively insignificant project? How many such projects are they handling currently? Related questions would be: what kind of organization is this? How long has it been in business? How does it define its market, or in the case of an NGO or government agency, its central purpose? What is its current place in that market, and what does it want its strategic place to be in the market in the near future and longer term?
You should structure your early questions as generalities. You don’t want to come across too aggressively, especially with negotiators who are less inclined to answer too many questions. As the negotiation proceeds, you can transition to more specific questions. Remember, we know the other party needs your product or service, but why? How can you satisfy this party’s need and make him more financially or otherwise dependent upon you or your product?
Treat the unknown as a place of hidden potential, not a frightening minefield. Negotiations are won mostly at the preparation table, not the negotiation table. Research the market, the person, the entity, etc., but don’t feel bound by the limitations of that information. The facts that you have indicate only some of the probabilities, but certainly not all of the possibilities.
The most emotionally challenging aspect of preparation involves embracing the unknown as a place of potential in the negotiation. The critical question is: “What don’t I know that I need to know?” While information asymmetry can be the most unsettling aspect of negotiating, it can also be the most interesting. This is because the discovery of information on both sides of the table provides opportunities for creative solutions. When fear causes a negotiator to hide information, that negotiator (and perhaps his counterpart as well) works against the formation of a deal, not for it. So, don’t spend all of your preparation time determining how to lock in a deal. Instead, spend time brainstorming and identifying questions that once answered, will help you unlock ideas.
Negotiation by its very nature requires compromise, which means there is no such thing as absolute power in negotiations. Every negotiator has some power and there’s always some degree of mutual dependence. So be careful not to short-circuit your main power source because you are so focused on alternative power sources. Your BATNA can help you determine what is probable if the current deal fails to materialize; however, it’s incapable of revealing a deal’s full potential. Only you and your counterpart working together at the table have the power to create a deal that not only exceeds the BATNA, but perhaps makes it altogether irrelevant.