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BATNA explained: negotiation skills for leaders

BATNA explained in one line: it is the best thing you can do if the talks fail and no deal is signed. The word stands for "best alternative to a negotiated agreement." Every leader who sits down to bargain, with a supplier, a partner, a landlord or a new hire, has one, whether or not they have thought about it.

Where the idea comes from

Roger Fisher and William Ury, both linked to the Harvard Negotiation Project, introduced the term in their book Getting to Yes, first published in 1981. The book argues that you should negotiate on the merits of the problem. It also says you need a way to judge any offer. A fixed bottom line is one way to do that, but the authors warn that it can be too rigid. They offer your best alternative as a better yardstick.

The idea is simple. A deal is only good if it beats what you would do without it. If the offer is better than your alternative, say yes. If it is worse, you are free to walk away.

Sources: Roger Fisher and William Ury, Getting to Yes: Negotiating Agreement Without Giving In (Houghton Mifflin, 1981; 2nd edition with Bruce Patton, Penguin Books, 1991); Wikipedia, "Best alternative to a negotiated agreement", en.wikipedia.org/wiki/Best_alternative_to_a_negotiated_agreement

Why a bottom line is not enough

Many people prepare for a talk by picking a number they will not go below. That sounds firm, but it has two problems. First, the number is often a guess. Second, once you say it out loud, you may stop listening to ideas that could work better than your number.

A BATNA is different because it is tied to something real. It is not "I will not pay more than X." It is "if we fail, I will buy from supplier B at this price and this delivery date." You can check that. You can improve it. And it keeps you calm, because you know you have somewhere else to go.

Fisher and Ury also point out that the party with more power does not always win. A smaller company with a strong alternative can bargain well against a large one with a weak alternative. Power at the table comes from what you can do away from it.

Sources: Fisher and Ury, Getting to Yes, chapter on negotiating when the other side is more powerful (Penguin Books, 1991 edition).

Three steps to build your BATNA

The book gives a short method that any team can follow before a meeting.

  • List the alternatives. Write down every action you could take if no deal is reached. Include the dull ones, such as keeping things as they are.
  • Improve the best ideas. Take the most promising options and turn them into something you could really do. Call the other supplier. Ask for a written quote. Check the lead time.
  • Pick one for now. Choose the alternative that looks best. This is your BATNA, and you can change it as you learn more.

Step two is the one most people skip. An alternative that exists only in your head is weak. One that is backed by a real quote or a real offer is strong.

Sources: Fisher and Ury, Getting to Yes (Penguin Books, 1991 edition), chapter on knowing your best alternative.

Turn it into a walk-away point

Once you know your BATNA, put a value on it. Ask what it is worth in money, time and risk. Then compare it with each offer on the same terms. A higher price from a supplier may still win if it includes faster delivery or better payment terms. A lower price may lose if the quality is worse.

Your walk-away point is the least favourable deal that is still better than your BATNA. Write it down before you enter the room. It helps you avoid two common errors: accepting a poor deal because you feel pressure, and rejecting a good deal out of pride.

Be honest about your numbers. It is easy to rate your own alternative higher than it really is. Ask a colleague who was not part of the planning to test it.

Sources: Fisher and Ury, Getting to Yes (Penguin Books, 1991 edition).

Think about their BATNA too

The other side has an alternative as well. The better you can guess it, the better you can judge how much room there is for a deal. If your counterpart has no good option, they have more reason to agree. If they have a strong one, you may need to offer more value or find a creative term.

This work is also useful when your own BATNA is weak. If your options are poor, spend your preparation time on improving them before the talk starts. Look for a second buyer, a second source or a different timeline. Even one extra option changes how you feel at the table, and how you act.

A practical habit for leaders is a one-page prep sheet. On it, write your goal, your BATNA, your walk-away point, your guess at the other side's BATNA, and two or three ideas that could create value for both parties. Review it before each important meeting.

A short checklist

  • Can I name my alternative in one sentence?
  • Is it real, with a quote, offer or plan behind it?
  • Have I valued it on the same terms as the offer?
  • Do I know my walk-away point?
  • Have I thought about what the other side will do if talks fail?

If you can answer yes to all five, you are far better prepared than most people who walk into a negotiation. The goal is not to be tough. It is to make a clear choice, with open eyes, about whether a deal is worth taking.

Sources: Roger Fisher and William Ury, Getting to Yes: Negotiating Agreement Without Giving In (Houghton Mifflin, 1981; Penguin Books, 2nd edition, 1991).