Knowing your fallback alternative helps you avoid costly mistakes.
By Yvonne Milosevic
Some people approach the negotiating process with the kind of hand-rubbing glee usually reserved for their Catan game night. Others loathe the experience and try to avoid it at all costs. No matter where you fall on the spectrum, everyone should go into negotiations with a BATNA, or “best alternative to a negotiated agreement.”
A BATNA is essential for any situation where your counterpart might have competing interests—from salary talks to car purchases to closing a deal with clients. Without it, you might walk away from a solid offer. Or worse, accept one you that should have rejected.
So, how do you determine your BATNA? Start with the following:
Step 1: Consider the alternative(s).
If the negotiation at hand reaches an impasse, what will happen? For example, you receive a job offer, but the salary seems too low. Your BATNA is either accepting a competing offer (if you have one) or remaining in your current position.
You can’t make an informed decision about whether to accept a proposal unless you understand all the alternatives. That’s why analyzing the deal on the table is vital to see how it stacks up point by point against your BATNA.
With the employment offer example, you need to consider several factors, from benefits to vacation days to stock options or career growth potential. Once you game out all those aspects, you may find the new offer worthwhile.
Step 2: Determine your reservation value.
With your BATNA in mind, it’s time to turn your attention to clarifying your reservation value. This is the lowest value deal you’ll accept—aka your walk-away point. Your reservation value should always be higher than your BATNA.
Imagine you’re in the market for a new car and visiting various dealerships to find your dream ride. As the buyer, your reservation value is the most you’re willing to pay. Suppose the value of the deal proposed to you is lower than your reservation value. In that case, you’re better off rejecting the offer and pursuing your BATNA: better deals at another car dealership.
Step 3: Think about their BATNA, too.
You won’t know everything about the other party’s BATNA. Still, try to analyze their motivations before going into the negotiation. Ask yourself what their next steps might be if you can’t get to a deal. “Knowledge of your own BATNA will only take you so far,” notes this blog post by Katie Shonk from the Harvard Law School Program on Negotiation.
For example, before interviewing for a new job, arm yourself with as much intel as possible about the company’s position. “Research hiring trends in your field to get a general sense of whether a firm is likely to have lots of good candidates or very few,” Shonk advises.
“Of course, you can also ask the recruiter directly how many candidates the firm is considering, but expect her to exaggerate the strength of the firm’s BATNA.”
Final Thoughts on Negotiations with a BATNA
“Despite the importance of the BATNA, people often are at a loss as to how to define it, improve it, flaunt it, or perhaps hide it,” says Kellogg School of Management professor Leigh Thompson. In a piece for Quartz at Work, Thompson explains how to use your BATNA to prevail in any negotiation. She urges people to be proactive about their BATNA and think of it like a plant that needs regular tending.
For instance, she advises that job seekers ramp up their networking and attend recruiting events. That way, as they weigh potential job offers, they can consider them in the context of other possible prospects.
“Don’t be passive when it comes to developing your BATNA,” Thompson warns.
Also, because BATNAs can fall through, try to have at least two or three of them in your back pocket. While Thompson cautions against pitting several offers against each other, she does suggest being honest about having a BATNA without giving away too much of your hand.
“Rather than revealing exact details, such as the compensation another employer has offered, say something like: ‘I have other options I’m intrigued by. But I prefer to talk about what it would take to work things out with you.’ That keeps the focus on the current discussion and prospective relationship,” Thompson says.
In the end, going into negotiations with a BATNA that’s rock-solid is critical. It means you can always walk away from a tempting offer, confident that there’s another appealing alternative waiting in the wings.
