Principled negotiation : What is your BATNA?

Principled negotiation : What is your BATNA?

Kamal Kumar Dubey MRICS, MCIArb, MCInstCES, MCIOB, RICS accredited Commercial Mediator, makes a point Having talked about conflict resolution strategies and four principles of win -win negotiation (Principled Negotiation – Art of Conflict Management) in the previous article www.constructionweekonline.in/people/16267-principled-negotiation-art-of-conflict-management,it is important to assess the bargaining position of other party before getting into negotiation process. This article primarily talks about the best alternative to a negotiated agreement and seven step negotiation process.

This article primarily talks about the best alternative to a negotiated agreement and seven step negotiation process. Negotiators usually protect themselves against the worst outcome. What will be your call in the worst-case scenario? What if the other party is in a strong negotiation position? What is the bottom line? If you are a seller what is the least amount you will accept before walking out of the negotiation? Or if you are a buyer, what is the maximum amount you will pay? These assessments will identify your alternatives to a negotiation process i.e. BATNA

Parties involved in principled negotiation should also identify BATNA (best alternative to a negotiated agreement), a concept developed by Roger Fisher and William Ury of the Harvard Program on Negotiation. BATNA refers to important alternative options that a party can utilize incase the negotiation fails, and an agreement could not be reached. If a person involved in the negotiation knows his best alternative, he can negotiate agreements more successfully.

A strong BATNA ideally means better deal (favorable terms) or no deal because you have a strong alternate plan. Consider a situation wherein you are negotiating your salary with two job offers in hand. You have a strong alternate plan (i.e. job offer) if the outcome of the negotiation is not in your favor. If you know your bottom line, then you can push hard or back off in negotiations.

The concept of BATNA can be understood with the following scenario wherein a buyer and seller are negotiating a car deal. Buyer came across an advertisement wherein seller would like a value of $30K. However, buyer is willing to spend only $20K for a car. Since, the car is well maintained and under warranty, buyer would like to approach seller for a negotiation.

Before approaching the seller, the buyer should look out for his bottom line. What if the seller is not willing to sell the car for $20K? What is the best alternative? Few suggested approaches to identify the best alternatives are:

• Since the car is well maintained and within warranty, is the buyer willing to pay $25K?
• What is the seller’s alternative if he will not sell for $25K? Will he still get a good price?
• What are the seller’s alternatives if the car is not sold for a certain time? Is the seller going to stick to the same price?
• The buyer can do some research to understand the current market value of the car.
• What if an agreement is not made? The buyer will continue to use public transport.
• What are other alternatives available for the buyer?

Similarly, the seller will also have to assess his alternatives, once buyer approaches for a negotiation. One of these alternatives could be attractive for buyer when buying a car. On the other hand, selling the car for 25K can be better for seller than holding the car for a longer time. This assessment of alternatives to a negotiated agreement will protect both the parties from accepting the terms that are non-favorable.

The whole idea of the negotiation is to get something better than the BATNA and if your BATNA is clearly identified, you can steer the negotiation process in your favor. From the buyer’s perspective, $25K is his BATNA and buyer does not really want to pay more than that. Similarly, the seller must decide his BATNA and will not sell the car for a value less than his BATNA.

At this point, the parties will walk away if the agreement is not reached. Once BATNA is identified, the next stage is to prepare and arrange to negotiate. It is always a difficult task to decide the starting point for a negotiator. How do I start? What is my first approach? How will the buyer approach the seller for negotiation”.

Professor Michael Dues, University of Arizona, in his book “Conflict Management Achieving Solutions for Life, Work and Beyond” identifies seven step process that can be applied within four principles of negotiation developed by Roger Fisher and William Ury.