A quick word first
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It takes two to tango. Same for concluding a deal. The terms that you and your counterpart settle upon have got to be better than whatever either one of you can achieve by walking away.
In negotiation-speak, that means both of you must do better than your respective BATNA’s (your Best Alternative to a Negotiated Agreement).1 Effective preparation always requires a clear-eyed assessment of what you you’ll do if the deal falls through.
If you’re lucky, you may have many attractive nonagreement alternatives. Still, you must choose the best of the best as your measuring stick. If your options are poor, it comes down to picking the least-bad of the lot. Most people recognize that as an important first step. But many trip up after that.
1. Your BATNA is not your bottom line
Let’s say you hope to sell your aging SUV. It’s in good condition but it has very high mileage. Online sites say that it’s worth about $5,000 in a private sale. That’s what you’re looking for. Your BATNA here isn’t another deal. Rather here it’s being patient and holding out for something close to that.
But what if the daughter of a friend of yours approaches you about buying the vehicle, and this would be her first car? My guess is that most people would trim the price, at least a bit. And once they started to think about it, they might come down a bit more just to scratch this from their to-do list.
In short, context matters. For someone you know and like, you might accept less than your BATNA. And you might say a curt no to a person you despise, no matter how much they offered.
2. BATNA’s do not stand still
Your preferred no-deal option can improve, deteriorate, or vanish completely. Jill, fresh out of business school, may have in hand a good offer from Company A, but still want to explore other opportunities. And ‘lo and behold, she gets a better offer from Company B. As she seeks to further improve it, her original offer from Company A becomes her new BATNA.
Of course, it could have gone the other way. While Jill was out shopping alternatives, Company A could have pulled its offer. Now, without a good walkaway, she better be cautious about how hard she pushes Company B to sweeten its proposal.
The lesson? Assess the stability of your current no-deal alternative. Consider better- and worse-case scenarios. Plan what you’ll do in both instances.
3. When to reveal your BATNA and when to mask it
If you have a poor BATNA—if nobody has made an offer on what you’re selling—it’s hard see how sharing that fact would be helpful. People who are kind might express sympathy, but the disclosure is unlikely to make them more generous. Give some thought in advance about how you’ll deflect questions about competing while still preserving your integrity.
One might say something like, “No harm in asking, but we’ll keep all offers confidential, including yours, of course.” That’s technically true, I suppose. But it is certainly evasive, and arguably deceptive on top of that. Far better to anticipate such questions rather than respond on the fly.
Be careful how you express yourself when you have a strong walkaway. Your counterparts need to know what it will take for them to make a realistic offer, but most people don’t like having their arms twisted. If they lowball, express thanks, then explain that you have something markedly better in hand. Maybe spell it out in general terms and ask them to put something out that would be worth your consideration.
4. Probe the other party’s BATNA
Others may be likewise cautious about revealing their cardd. So, start beforehand by again thinking about best- and worst-case scenarios from your point of view. (For the former, they are desperate to do a deal with you; for the latter, they have a competing offer that will be hard to match.) Judge the likelihood of both those extremes.
The more you learn, the more you’ll understand the potential size and shape of the ZOPA (negotiation-speak for Zone of Possible Agreement). The floor of that Zone is shaped by your nonagreement alternatives, just as the ceiling is shaped by theirs.
As you negotiate, listen for cues to help you refine your assessment. Don’t jump to conclusions. A rapidly tapping foot may tell you they’re eager to close a deal with you. But it could also mean that someone else has made them an attractive offer that will expire at the end of the day.
5. A poor BATNA doesn’t doom you to a bad outcome
Back in February, I told about how President Teddy Roosevelt’s campaign manager turned the tables in an important negotiation leading up to the 1912 election. All their options were terrible, but nevertheless the fellow got a great deal. Here’s the link.
If you’re a founding subscriber and recall the article, a tip of my hat. It’s a mark of what an instructive story it is. Still you might want to take another look at it in light of the content in this piece.
All readers here can skip its first section (titled “Know when to walk away . . . and when to run”), as some of that early material is covered here. Jump down to the section after that, “The Problem.”
Consider the negotiation challenge that TR’s campaign faced. What would you have advised them to do? Then check out their daring solution. Have fun!
Housekeeping
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The word was coined by the authors of the classic text, Getting to Yes: Negotiating Agreement Without Giving In, by Roger Fisher, William Ury, and Bruce Patton.