WATNA: Worst Alternative to A Negotiated Agreement

In negotiation, WATNA stands for “worst alternative to a negotiated agreement,” representing one of several alternative options if a resolution cannot be reached. This is a useful technique to help understand what might be a negotiation outcome, that even if negative is still better than a WATNA, making the deal still feasible.

Component	Description
Origin	The concept of WATNA is widely used in negotiation and conflict resolution strategies.
Overview	WATNA represents the least favorable outcome or option a party to a negotiation can expect if they fail to reach an agreement. It is a critical concept in negotiation planning and helps individuals and organizations assess the risks and potential consequences of not reaching a negotiated agreement. Identifying the WATNA allows negotiators to evaluate whether an agreement is better than their alternatives and guides their negotiation strategy.
Key Elements	– Negotiation Scenario: The specific situation or issue under negotiation.
	– Alternatives: The various courses of action or decisions available to the negotiator if an agreement is not reached.
	– Assessment: Evaluating and ranking the alternatives in terms of their desirability and potential outcomes.
	– WATNA Identification: Identifying the single worst alternative among all available options.
How It Works	1. Identify Alternatives: List all possible alternatives or actions that can be taken if a negotiation fails.
	2. Assess Alternatives: Evaluate each alternative in terms of its potential outcomes, consequences, and desirability.
	3. Identify the WATNA: Determine which alternative is the least favorable and has the most negative impact.
	4. Compare with Negotiated Agreement: Assess whether the negotiated agreement is better than the WATNA.
	5. Negotiation Strategy: Use the knowledge of the WATNA to inform negotiation strategy, objectives, and concessions.
Applications	– Business Negotiations: Used in various business negotiations, such as contracts, mergers, and acquisitions.
	– Conflict Resolution: Helps parties understand the potential consequences of failing to resolve disputes.
	– Salary Negotiations: Individuals use WATNA to assess job offers and negotiate salaries.
Benefits	– Informed Decision-Making: Provides clarity on the risks and rewards of negotiation outcomes.
	– Improved Strategy: Guides negotiators in setting realistic goals and making informed concessions.
	– Risk Mitigation: Helps organizations avoid unfavorable agreements by comparing them to the WATNA.
Drawbacks	– Subjectivity: Assessing alternatives and determining the WATNA can be subjective and influenced by individual perspectives.
	– Incomplete Information: Limited information about the other party’s alternatives can affect the accuracy of WATNA assessments.
Key Takeaway	WATNA is the worst possible outcome a party can expect if a negotiation fails. It is a crucial concept in negotiation strategy, helping individuals and organizations assess the risks and potential consequences of not reaching a negotiated agreement. By comparing the negotiated agreement with the WATNA, negotiators can make informed decisions and concessions during the negotiation process.

Table of Contents

Understanding a WATNA

WATNA is an acronym for the “worst alternative to a negotiated agreement.”

It describes the worst result a party could achieve if the negotiation process failed.

The WATNA is an important part of the negotiation process. In a book describing the principles of negotiation, authors Matthew P. Guasco and Peter R. Robinson note that “sometimes, the deal on the table is acceptable because it is less bad than your WATNA, i.e., you are minimizing loss or making the best of a bad situation.”

Put differently; the WATNA provides a benchmark that settlement offers can be evaluated against.

It gives one party the confidence to accept an outcome that is far from ideal but, relatively speaking, is not the worst possible outcome.

Preparing a WATNA for use in a negotiation

Before a WATNA is prepared, each party must decide how likely that particular outcome will be.

Both parties need to be realistic. If either could achieve their ideal outcome with a minimum of fuss, there would be no need for negotiation in the first place.

An organization without a clear WATNA (or BATNA) will enter a negotiation with false and unrealistic expectations.

The worst alternative to a negotiated agreement imbues each party with a sense of purpose at the negotiating table.

With greater awareness of their respective worst-case scenario, each party gains more clarity as a result.

When is a WATNA most effective?

Sometimes, one party will be forced to cut its losses during a negotiation. This usually occurs in scenarios involving a high degree of uncertainty.

For instance, an unemployed person in discussions with a hiring manager is entering the negotiation in a weak position.

The WATNA of the unemployed person may involve being overlooked for the job and having to declare bankruptcy.

However, we noted in the previous section that a WATNA could be used to give a negotiating party more purpose.

In this example, purpose means the unemployed individual strengthens their position to reduce uncertainty.

Perhaps the individual applies for as many job as possible and receives a bunch of offers.

Armed with a list of comparable jobs, they then become better equipped to use new insights as a negotiation tool during the next job interview.

With greater purpose, the job seeker is in a far stronger position. Instead of bankruptcy, the WATNA becomes successful employment in a low-paid job.

While this is a long way from the most desirable outcome, the individual has nevertheless used a WATNA to strengthen their position.

As Guasco and Robinson noted, the deal on the table is simply less bad than the original WATNA.

At some point in the future, the position of the person who is now employed may become strong enough to be designated as their BATNA.

Drawbacks of Worst Alternative to a Negotiated Agreement (WATNA)

Pessimistic Outlook:

Negative Focus: Focusing on WATNA can lead to a pessimistic outlook on negotiations, potentially overshadowing more positive and constructive approaches.
Risk-Averse Behavior: Overemphasis on WATNA might lead to overly cautious or risk-averse behavior, preventing negotiators from pursuing potentially beneficial agreements.

Impact on Negotiation Dynamics:

Reduced Creativity and Openness: Fixation on the worst-case scenario can limit creativity and openness to exploring innovative solutions during negotiations.
Potential for Escalation: If both parties focus on their respective WATNAs, it may escalate conflict and reduce the likelihood of finding a mutually beneficial agreement.

Influence on Decision-Making:

Paralysis by Analysis: Constantly evaluating the worst possible outcome can lead to decision-making paralysis, where negotiators are unable to make proactive choices.
Impedes Relationship Building: A focus on WATNA can impede the development of trust and collaborative relationships between negotiating parties.

Cognitive and Emotional Biases:

Confirmation Bias: There’s a risk of confirmation bias, where negotiators only seek information that confirms their worst fears, ignoring data suggesting more favorable outcomes.
Emotional Decision-Making: Decisions driven by fear of the worst-case scenario might be more emotional and less rational.

When to Use WATNA

Appropriate Scenarios:

High-Risk Situations: Particularly useful in negotiations where the stakes are high and understanding the worst-case scenario is crucial for risk management.
Legal and Litigation Contexts: In legal negotiations or litigation, where understanding the worst-case outcome is essential for making informed decisions about settlement versus court trial.

Strategic Application:

Risk Assessment: Helps in assessing risks and preparing for the worst-case scenario as part of a comprehensive negotiation strategy.
Informed Decision Making: Can be a valuable tool for making informed decisions when negotiating under uncertainty.

How to Use WATNA

Developing and Utilizing WATNA:

Identify Your WATNA: Clearly define the worst-case outcome if the negotiation fails.
Evaluate Realistically: Assess the likelihood and impact of the WATNA, ensuring not to overestimate its severity.
Use as a Benchmark: Use WATNA as a benchmark to evaluate the negotiation offers but maintain a balanced perspective.
Develop Contingency Plans: Prepare contingency plans in case the negotiation trends towards the WATNA scenario.

Best Practices:

Maintain Objectivity: Strive to remain objective when assessing WATNA, balancing it with more optimistic scenarios.
Contextual Application: Apply WATNA in context, recognizing that it is one of several tools and considerations in negotiation planning.
Communication and Transparency: Communicate transparently with the other party about concerns and risks, using WATNA as a basis for understanding mutual interests in avoiding the worst-case scenario.

What to Expect from Implementing WATNA

Enhanced Risk Awareness:

Increased Awareness of Potential Risks: Provides a clear understanding of the risks involved in the negotiation, enhancing preparedness.
Informed Risk Management: Aids in making informed decisions by weighing the negotiated agreement against the worst-case alternative.

Potential Impact on Negotiations:

Influences Negotiation Strategy: Understanding WATNA can influence the overall negotiation strategy, often leading to more cautious approaches.
Encourages Settlement: In some cases, awareness of WATNA can encourage parties to reach a settlement to avoid the worst-case outcome.

Challenges and Considerations:

Avoiding Negativity Bias: Care should be taken to avoid a negativity bias where the focus on WATNA overshadows potential positive outcomes or constructive solutions.
Balance with Optimistic Scenarios: It’s important to balance the consideration of WATNA with more optimistic scenarios like BATNA (Best Alternative to a Negotiated Agreement) to maintain a realistic and balanced negotiation approach.

In summary, WATNA is a useful tool in negotiation for understanding and preparing for the worst-case scenario. It aids in risk assessment and informed decision-making but should be used cautiously to avoid fostering a negative or overly cautious mindset that can hinder effective negotiation outcomes. Balancing WATNA with more positive alternatives and maintaining an objective perspective are key to its effective use.

WATNA vs. BATNA key differences

A WATNA, or the worst alternative to a negotiated agreement, is the worst result a party could achieve if it decided to cease negotiations.

A BATNA, or the best alternative to a negotiated agreement, is the best result a party could achieve after terminating the negotiation proceedings.

Defining WATNAs

The WATNA represents the worst-case scenario if negotiation fails. In other words, where all possible alternative courses of action have been exhausted.

The WATNA should be determined before entering the negotiation to avoid agreeing to a sub-optimal course of action.

In some cases, the WATNA may cause a negotiating party to look at their predicament from a different angle.

This means they may reconsider their position and agree to a compromise that helps them avoid serious ramifications.

Common examples of WATNAs include:

A loss of business, suppliers, employees, or distributors.
Litigation or arbitration.
Bankruptcy.
A loss of time, money, or efficiency such as from strike action.
Reputational damage.

Defining BATNAs

For a business, the BATNA is the most profitable alternative option should the negotiation process not succeed.

Like the WATNA, the best alternative to a negotiated agreement is determined beforehand.

Otherwise, a party cannot make an informed decision as to whether the proposed deal is better than any other alternative.

According to Harvard University researchers, the BATNA can be clarified in the following steps:

List the potential alternative outcomes if the negotiation ends in a stalemate.
Evaluate each alternative in terms of the value of pursuing it, and then select the course of action with the highest expected value. In other words, the BATNA.
Once the BATNA has been determined, a reserve value can be calculated. This is the lowest-valued deal the business is willing to accept. When the value of a deal is lower than this threshold, it should be rejected and the BATNA pursued instead.

BATNAs are a key driver of successful negotiation because, in most cases, an entity never agrees to a deal that is worse than their best alternative.

This gives them power at the negotiating table and the ability to walk away from an unfavorable deal.

Having said that, successful BATNAs rely on the business being able to accurately value each course of action.

The value of time and money is relatively easy to measure, but the value of qualitative factors such as business relationships or brand reputation is harder to determine.

Summarizing the key differences between WATNA and BATNA

A WATNA is the worst result a party could achieve if it decided to cease negotiations, while a BATNA is the best result a party could achieve with the same action.
The WATNA may cause one party to look at their predicament from a different angle and compromise on a deal to avoid risks. These are usually risks related to legal action, a loss of business, reputational damage, and bankruptcy.
BATNAs are a key driver of successful negotiation because, in theory, a party should never agree to a deal that is worse than their best alternative. Doing so relies on an ability to determine the value of each alternative course of action – whether that value is financial or otherwise.

WATNA examples

In the final section, let’s conclude by listing some WATNA examples from common, everyday scenarios.

Heating installation

Consider in the first example that winter is approaching and you want to install underfloor heating in your home.

After finding a contractor who quotes $7,000 for the installation, you can then enter into a negotiation to see if you can secure more favorable terms.

If the negotiation fails for whatever reason, the best alternative to a negotiated agreement (BATNA) would be to find a contractor who will install the heating for a lower price.

The WATNA, on the other hand, may be that you have to hire another contractor at the same price or start a new negotiation process.

For those that live in a small town without access to many services, the WATNA may see them forced to hire a more expensive contractor or, worst of all, endure the winter without underfloor heating.

Buying product from a supplier

Suppose you are a café owner who purchases 2000 kilograms of coffee beans from a supplier each year.

You consider yourself one of the supplier’s best customers and as a result, are hoping to negotiate a new rate from $10 per kilogram to $8 per kilogram.

In dollar terms, this would represent a saving of $4000 per year. What’s more, you are also hoping to improve the delivery time from 72 hours to 48 hours to secure fresher beans and improve the taste of the final product.

Before you negotiate with the supplier, it’s important to know who the other suppliers are in the coffee bean industry.

What are they are charging per kilogram and how fast can they deliver? Are they reliable? Do they pay on time?

If you know there is a supplier who sells beans for $9 a kilo and can deliver in 48 hours, you have already have a BATNA. But this information also defines your WATNA.

Perhaps you identify that the only suppliers who sell for $8 per kilogram are international businesses that cannot meet your desired delivery timeframe. In other words, your WATNA may involve accepting fewer fresh ingredients to save $4000 per year.

Alternatively, you may walk into the negotiation with the knowledge that $9.50 per kilogram is the industry price and that securing a lower price is unlikely. In this case, the WATNA is that you remain with your current supplier.

If you and the supplier cannot come to an agreement, a café without enough coffee beans to supply customers may be the WATNA.

Selling a house

In the last example, imagine that you need to sell your house at short notice to start a new job in another state. You list the house for sale at $400,000 and begin negotiating with an interested party who offers $350,000.

This number is below what you paid for the home, but this is a more desirable option than the WATNA of failing to sell the home before the new job is due to commence.

In other words, you choose to accept the offer and make a loss on the house because it is a more attractive option than arriving in a new state without a place to live.

Making a negotiation successful with WATNA, BATNA, and ZOPA

There are many ways to conduct a negotiation.

While it might seem compelling to run things like game theory, throughout a negotiation, in reality, in most cases, you need to follow a few rules of thumb.

In fact, the game theory looks good for movies but might not be as good when running a negotiation, where important things are at stake.

Instead, with WATNA, BATNA, and ZOPA, you can pretty much run into most negotiations and still get to a satisfactory outcome.

In fact, as we saw, the WATNA helps you define what’s a non-optimal outcome you would accept from a negotiation, as you have set the worst-case scenario if the negotiation fails.

This simple exercise is liberating because it gives you more confidence throughout the negotiation.

Once you have set the worst-case, with BATNA, you can set the best-case scenario.

Also, here, you will handle the negotiation with much more confidence, as you know that there might be a plan B that works well if the negotiation fails.

Being able to walk away from a negotiation is, in most cases, a position of strength.

Once you set the worst and best possible scenario for potentially walking away from a negotiation, you can now understand your ZOPA.

The ZOPA gets extremely effective if you have already set WATNA and BATNA.

Indeed, only then will your ZOPA be cleared out, as now know what the boundaries within which you can move to make the negotiation successful are!

Thus, for the ZOPA to work well, you should start by defining WATNA, then BATNA.

There is how you can walk into a negotiation with much more confidence and the ability to close it in a satisfactory manner.

Additional Case Studies

Book Publishing Deal:
- Scenario: An author has written a novel and is negotiating with a major publisher about the terms of a publishing deal.
- WATNA: The publisher declines to publish the book, and the author is unable to find another reputable publisher. The author might then have to consider self-publishing, which might not give the reach or credibility a major publisher would provide.
Sports Contract:
- Scenario: A professional basketball player is in the final year of his contract and is negotiating a new deal with his current team.
- WATNA: The negotiations fall apart, and no other team offers a contract. The player might have to consider playing in a less prestigious league or even retiring.
Merger between Companies:
- Scenario: Two companies are considering a merger to combine resources and market share.
- WATNA: The merger talks fall through, and a competitor takes advantage of the situation, putting both companies at a disadvantage in the market.
Film Production:
- Scenario: A film producer is negotiating with a famous actor to star in an upcoming movie.
- WATNA: The actor declines the role, and the producer can’t find a replacement with similar star power, leading to potential lower ticket sales and reduced interest in the movie.
Environmental Negotiations:
- Scenario: An environmental group is negotiating with a corporation to reduce its carbon emissions.
- WATNA: The corporation refuses to change its practices, leading to increased pollution and potential legal and reputational consequences.
Real Estate Rental:
- Scenario: A potential tenant is negotiating the rent price and terms for a commercial property.
- WATNA: The property owner refuses the terms, and the tenant can’t find a similar property in the desired location, leading them to settle for a less ideal space or higher rent elsewhere.
Product Licensing:
- Scenario: A tech startup is negotiating with a larger company to license its software.
- WATNA: The larger company declines the license, and the startup struggles to find another company with the same market reach, potentially stunting its growth.
Music Festival Performance:
- Scenario: A music artist is in talks to headline a major music festival.
- WATNA: The festival organizers choose another artist, and the initial artist misses out on the exposure and revenue from the event.
Trade Agreement:
- Scenario: Two countries are negotiating a trade agreement to benefit both economies.
- WATNA: The negotiations fail, leading to potential tariffs, reduced trade, and strained diplomatic relations.
Medical Procedure Costs:
- Scenario: A patient is negotiating the costs of a medical procedure with a hospital.
- WATNA: The hospital refuses to reduce the cost, and the patient can’t afford the procedure or has to take on significant debt.

Key takeaways:

A WATNA describes the worst-case scenario for either party if the negotiation fails completely.
A WATNA gives the individual or business the confidence to accept an outcome that, while far from ideal, is better than the worst possible outcome.
A WATNA is most effective in negotiations with a high degree of uncertainty. It can encourage a concerned party to cut its losses and move forward with purpose.

Key Highlights:

WATNA stands for “worst alternative to a negotiated agreement” and represents the worst result a party could achieve if the negotiation process fails.
WATNA is an essential part of the negotiation process, as it provides a benchmark for evaluating settlement offers and helps parties make informed decisions.
Preparing a WATNA involves realistic assessments of potential outcomes and can give parties a sense of purpose and confidence during negotiations.
WATNA is most effective in uncertain scenarios where parties may be forced to cut their losses and find compromise to avoid serious ramifications.
BATNA, on the other hand, represents the best alternative if negotiations fail, and successful negotiation often relies on parties having a strong BATNA.
Combining WATNA, BATNA, and ZOPA (zone of possible agreement) can lead to a successful negotiation outcome, providing confidence and clarity during the process.
Understanding both WATNA and BATNA enables parties to negotiate with more confidence and better evaluate potential deals.
WATNA helps parties avoid accepting sub-optimal outcomes and provides a clear understanding of the worst-case scenario.
The ability to walk away from a negotiation is often a position of strength, and setting WATNA and BATNA helps parties determine when to do so.
In negotiations, considering worst and best-case scenarios and finding common ground (ZOPA) can lead to win-win outcomes and successful agreements.

Related Frameworks	Definition	Focus	Application
WATNA (Worst Alternative to a Negotiated Agreement)	In negotiation theory, WATNA refers to the worst possible outcome that a party could face if no agreement is reached during a negotiation process.	Focuses on assessing the potential consequences and risks of not reaching an agreement, helping negotiators understand their BATNA (Best Alternative to a Negotiated Agreement).	Negotiation Strategy, Decision-making
BATNA (Best Alternative to a Negotiated Agreement)	A concept in negotiation theory referring to the best course of action a party can take if negotiations fail and no agreement is reached. It represents the alternative option available to a party outside the current negotiation.	Focuses on identifying the most favorable option available to a party if negotiations do not result in a satisfactory agreement, providing a point of leverage in negotiations.	Negotiation Strategy, Decision-making
ZOPA (Zone of Possible Agreement)	The range of possible outcomes in a negotiation where both parties’ acceptable terms overlap. It represents the area where agreement is possible and negotiations can be fruitful.	Focuses on identifying the space where mutually acceptable terms exist, facilitating negotiation by finding common ground and maximizing value for both parties.	Negotiation Strategy, Conflict Resolution
Reservation Price	In negotiation, the reservation price is the lowest (for a seller) or highest (for a buyer) price at which a negotiator is willing to accept a deal. It represents the point beyond which a negotiator is not willing to continue negotiating.	Focuses on determining the threshold beyond which a negotiator is not willing to compromise, helping establish negotiation boundaries and guide decision-making.	Negotiation Strategy, Pricing Strategy
Fisher and Ury’s Principled Negotiation	A negotiation approach developed by Roger Fisher and William Ury, emphasizing separating people from the problem, focusing on interests rather than positions, generating options for mutual gain, and insisting on objective criteria.	Focuses on collaborative negotiation to create win-win outcomes by understanding underlying interests, exploring creative solutions, and maintaining fairness and objectivity.	Negotiation Strategy, Conflict Resolution
Vroom-Yetton-Jago Decision Model	A decision-making model that helps leaders determine the appropriate level of employee participation in decision-making based on the nature of the decision and its impact on the organization.	Focuses on selecting the most suitable decision-making style (autocratic, consultative, or collaborative) based on situational factors and desired outcomes.	Leadership, Decision-making, Organizational Behavior
Analytic Hierarchy Process (AHP)	A structured decision-making technique that helps individuals or groups prioritize multiple criteria and alternatives by decomposing complex decisions into simpler components and evaluating them systematically.	Focuses on structuring decision-making by breaking down complex problems, comparing criteria and alternatives, and synthesizing judgments to reach a rational decision.	Decision-making, Multi-criteria Decision Analysis (MCDA)
Prospect Theory	A psychological theory of decision-making under uncertainty, suggesting that people make decisions based on potential gains and losses relative to a reference point, and they are risk-averse in gains but risk-seeking in losses.	Focuses on understanding how individuals perceive and evaluate risks and rewards, guiding decision-making by considering cognitive biases and framing effects.	Behavioral Economics, Decision-making, Risk Management