batna

BATNA: Best Alternative To a Negotiated Agreement

In negotiation theory, BATNA stands for “Best Alternative To a Negotiated Agreement,” and it’s one of the key tenets of negotiation theory. Indeed, it describes the best course of action a party can take if negotiations fail to reach an agreement. This simple strategy can help improve the negotiation as each party is (in theory) willing to take the best course of action, as otherwise, an agreement won’t be reached.

Understanding a BATNA

BATNA is an acronym for the term “best alternative to a negotiated agreement”.

The term was first coined by Roger Fisher and William Ury in their 1981 book Getting to Yes: Negotiating Without Giving In.

It’s important to understand that the best alternative to a negotiated agreement is not necessarily the ideal outcome. Instead, businesses should consider a BATNA to be the best they can do without the cooperation of the other party.

BATNAs are a critical part of negotiation tactics that should be in place before any business enters into a discussion. This helps decision-makers avoid accepting a worse outcome than they could get elsewhere. A solid BATNA also helps each party avoid rejecting an outcome that is better than its best alternative.

A BATNA can deliver several important other benefits:

  • It gives the business something to fall back on if negotiations fail.
  • It increases negotiation power. If a good alternative exists, the business does not need to concede as much. As a result, it can push the other party harder for a better deal.
  • It clarifies the reservation point, or the worst outcome the business is willing to accept.

Formulating a BATNA

A BATNA may not be immediately apparent. However, Fisher and Ury also provided a simple framework for stuck businesses:

  1. Start by brainstorming a list of actions that could be taken in the event an agreement is not reached. At this point, these actions are purely theoretical. But they must be realistic.
  2. Refine the list of actions according to their practicality, feasibility, and potential to add value. The definition of value will vary according to the individual business, context, or market it operates in.
  3. Tentatively select one option that seems to have the best mix of characteristics.
  4. Lastly, formulate the reservation point. Remember that this is the lowest-valued deal the business is willing to accept. 

BATNA best practices in business

Negotiations are often high-stress environments, so it is crucial to act decisively and strategically to ensure an optimal outcome.

Here are some BATNA best practices:

  1. Do not reveal a weak BATNA, otherwise known as a WATNA (worst alternative to a negotiated agreement). This gives the impression of a business with little leverage that will accept any deal that is put in front of them – regardless of whether it benefits them.
  2. Do not bluff about a BATNA. If prompted by the other party, explain that a range of possible alternatives is being assessed. But maintain a focus on the current deal and do not embellish or fabricate a BATNA to increase bargaining power.
  3. Do not reveal a BATNA too early. This can be misconstrued as hostility by the other party, creating a tense and non-collaborative atmosphere which stifles negotiation. Even if the business has a robust BATNA, it is better used at the end of the process once all other avenues have been exhausted.
  4. Work to actively improve a BATNA with a longer-term view. The business must do everything it can to actively improve an alternative course of action.
  5. Avoid being talked out of a BATNA. If the other party criticizes or discourages a BATNA, the business must realize that this is nothing more than a negotiation tactic. In other words, the other party stands to benefit by encouraging you to take a lower-valued course of action. 

Key takeaways:

  • A BATNA, or the best alternative to a negotiated agreement, is a course of action to be taken when the negotiation process fails. 
  • Establishing a BATNA begins with brainstorming a list of theoretical actions and then choosing the one with the highest potential to add value.
  • Best practices dictate how a BATNA should be used. A business should avoid fabricating or exaggerating a BATNA as this could erode the integrity of their position in the negotiation itself.

Connected Business Concepts

watna
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.
zopa
The ZOPA (zone of possible agreement) describes an area in which two negotiation parties may find common ground. Indeed, ZOPA is critical to explore the deals where the parties get a mutually beneficial outcome to prevent the risk of a win-lose, or lose-win scenario. And therefore get to the point of a win-win negotiation outcome.
logrolling-negotiation
In a logrolling negotiation, one party offers a concession on one issue to gain ground on another issue. In logrolling, there is no desire by either party to advertise the extent of their power, rights, or entitlements. This makes it a particularly effective strategy in complex negotiations where partial or complete impasses exist.

Read Next: SWOT Analysis, Personal SWOT Analysis, TOWS Matrix, PESTEL Analysis, Porter’s Five Forces.

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Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which reached over a million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get The FourWeekMBA Flagship Book "100+ Business Models"