“When you fail to plan, you plan to fail.”
The most important stage of a negotiation takes place before you meet your counterpart. Whatever happens subsequently depends on it.
Yet, because it’s prior to what we casually call “negotiations,” most people fail to give it enough thought.
An Offer You Should Refuse
When should you reject an offer? When it’s not as good as what you can achieve on your own. For example, if I offer you my used car for €10,000 but you can buy an equally valuable car for €9,000, you should reject my offer.
The course of action you would take if we don’t arrive at a mutually beneficial solution is known as your BATNA: “Best Alternative To a Negotiated Agreement.” In the above example, buying the less expensive vehicle would be your BATNA.
Any offer below the value of your BATNA is one you would reject.
That is why your BATNA is also your “walkaway point”.
Either your counterpart proposes something better, or you walk away.
You should never enter a negotiation without first knowing your BATNA. Otherwise you don’t have an alternative against which to evaluate possible deals. Hence, you run the risk of accepting an offer that is worse for you than your BATNA.
Improve Your BATNA
Knowing your BATNA is a first step, but you can do better. You should never enter a negotiation without first improving your BATNA as much as you can.
A BATNA is not something that arises spontaneously in nature. It is a contingency plan you develop in your mind.
To define your BATNA, ask yourself this:
“What would be my best course of action if I can’t reach an agreement?”
And to improve it, ask:
“Is there anything I can do to create an alternative that I would prefer to my previous plan?”
This is a question you must repeat until you cannot answer in the affirmative.
In the previous example, as you and I go back and forth over the price of my car, you could be actively looking for a better option than the other €9,000 vehicle. You will improve your BATNA, and thus your bargaining power, by finding another comparable vehicle for €8,500, or a higher quality one for €9,000.
Many people think that the goal of a negotiation is to make a deal. Consequently, they say that a negotiation “fails” when the parties don’t reach an agreement. I beg to differ.
The goal of a negotiation is to make a “good” deal, meaning a deal that is better than each party’s respective BATNA. If each person has another option that is better for her, then the best outcome of the negotiation is “no deal.”
Suppose that I have another potential buyer who is willing to pay €9,500 for my car. My BATNA is to sell it to her. And since you can buy a vehicle of similar value to you for $8,500, the best possible outcome is for each one of us to implement our respecive BATNAs.
The difference between your BATNA and my BATNA is called the ZOPA: ZOne of PotentialAgreement.
If there is no ZOPA, as in the paragraph above, then it is best to part ways amicably, recognizing that this transaction would not add value to either of us.
You would be wise to ponder your counterpart’s BATNA, infer the ZOPA, and estimate if there is a mutually profitable deal to be made.
What would she do if she didn’t reach an agreement with you?
Can you offer her something better than that?
And is this something which is still better for you than what you could attain through other means?
In other words, can you make her a better offer without crossing your BATNA?
Your Career BATNA
The notion of BATNA extends far beyond commercial transactions. Take, for example, a hiring negotiation.
If you have a good job and a healthy financial position, you will only consider extraordinary opportunities.
If you have no job and no funds, any opportunity will seem “extraordinary” to you.
By the same token, if your potential employer has lots of options, because your qualifications and skills are merely average, then his BATNA will be relatively strong.
He won’t have to offer much to hire someone suitable for the job. This means that your bargaining power is low, since if you ask for more than other candidates, he will prefer them over you.
It is possible to live strategically, always developing your career BATNAs.
On the one hand, you can work on strengthening your financial condition and your job satisfaction.
On the other hand you can acquire skills and experience that will make you more valuable to a potential employer.
These two strategies will act as a ratchet during your career negotiations, allowing you to close better deals and bringing you greater and greater job satisfaction.
So what can you do to improve your professional BATNA?