The BATNA (Best Alternative to a Negotiated Agreement) has become an essential tool in the negotiation toolbox, yet many leave it in the box.
It is, in effect, your ‘walk-away’ point.
However, before you walk away, there are always alternatives that can be considered. Identifying these alternatives that make the ‘pie bigger’ is often a challenge only overcome after considerable work, but having done this preparation before entering the negotiation starts will always be useful.
Understanding your own BATNA is essential, but it is just as important to understand as best you can, the BATNA of the other party, or parties.
What do they value that you can deliver?
What are their ‘non-negotiables?
Will the decision maker be at the table?
How can you make the pie bigger for them at little cost to you?
There is a myriad of questions you can ask yourself that will give you a better feel for your relative position, simply by thinking about them, and assembling some information that may otherwise have been overlooked.
In a negotiation, we tend to automatically set ourselves for some sort of compromise. We assume that the net effect of the balance of wins and losses for both parties in the compromise will be the most satisfactory outcome for all.
Often it is not.
Prospect theory, first articulated by Daniel Kahneman points out that the pain we feel for a loss is much greater than the joy we feel for a gain. If we are given $50, we just say thanks, and are happy. If we are given $100, then $50 is immediately taken back, we feel pain. The outcome of both is the same, we are $50 ahead, but the balance of pain and joy is completely different.
This applies in a negotiation when trying to balance gains and losses for an acceptable outcome. At a rational level we can reach an agreement on the net outcome, but at an emotional level, a compromise generally does not allow for the impact of prospect theory on the perception of an individual of the net value delivered.
It will pay you to consider deeply how the impact of this disparity between gains and losses will be felt.
Negotiation is all about the recognition, articulation, and exchange of value.
The challenge is we all see value differently. Being able to recognise the value as the other parties in a negotiation see it will deliver hugely valuable insights to be leveraged.
In other words, understand the psychological BATNA of the other party as well as you can.
Header cartoon credit. Scott Adams and Dogbert perfect negotiation tactics.
